My rule of thumb:
1 unbanned jerk will cause the loss of 10 other players per month.
So if you have 10 unbanned jerks, you're losing 100 players per month (mostly new players who log in, see all the jerks, and log off and never come back).
I think there's a perception in the gaming communities that "you can't ban these [cheaters / jerks / douchebags / trolls] because there are few enough players that banning anyone would hurt".
On the contrary, you can't afford NOT to ban them. You MUST ban them if you want the game to thrive. There are a million gamers out there and 99% of them will not play in a game that gets dominated by trolls, jerks, douchebags and especially cheaters.
My opinion is that cRPG admin policy is far too lenient. I mean, not to name names, but I watched a recent case where I reported a troll, I posted his acts to the forum, he got banned and then I watched him weasel out of a lot of the ban time by posting a blatantly fabricated version of events. I know they were fabricated because I was there watching him do it. I could have said something but ya know, fuck that guy, really. I did my job. I did more than my job. If the admins want to deal with him again later, after he drives off another 20 players, fine. Apparently he's even been banned before. How many chances do you give the same douchebag? How many players does he get to drive off while having his own little private style of fun, which incidentally nobody else enjoys?
Another good rule of thumb:
By the time you catch someone doing something, they have already done it dozens of times without getting caught.
You just caught someone team wounding random people on purpose? He's probably been doing it every day for weeks without getting caught.
You just caught someone spamming chat for 5 minutes straight? He probably does it all the time and you're the first admin to be on when he's on.
I've reported a couple people to the forums and it wasn't like, "Ooooo! I caught someone doing something bad! I'm tellin'!" If I reported someone, it's because they were being a gigantic prick up everyone's backside for a solid hour and I finally got sick of it enough to look for them and start taking screenshots. I reported them for the one thing I could prove and didn't report them for the 50 other things they did that annoyed me enough to get to that point.
And really, how many warnings does a well known player need? Yes, if Jim the Newbie fucks up, you can cut him a break. He didn't know that opening the gate would let in the entire enemy team. He's new. If Joe the Veteran of 10,000 Kills does that, you can probably be sure he did it on purpose, to be a troll, and the smack down upon him should be heard from across the ocean. The quickest way to kill any game, whether it's an MMORPG, an FPS or a Mount & Blade mod, is to let the community get dominated by trolls.