My two best and oldest friends are former bullies. For five years of grade school they would taunt me, harass me, and try to intimidate me. When teachers came to me after noticing things, I refused to ever tell on these kids, respond to their insults, or participate in fights with them. I'd like to think my good behavior set a higher example for them, but really they probably just did some growing up, tried to make amends out of guilt, and found we weren't that opposed.
On the other hand, the kids that I responded to, eye for an eye, always managed to incriminate me as the aggressor and get away without getting in trouble. Several of them still remain a problem to me and my actions against them have solidified me as an enemy in their minds, so they ignore my peace attempts.
On yet another hand, the kids that I over-reacted to were cowed completely. I believe it was Gandhi who said "An eye for an eye leaves you blind first, so shank twice when you cut a dude". This seems like some Machiavellian stuff but it is how things worked for me growing up. Now that I'm in high school I get more chances to perform to my fullest at things, and when a kid on the football team tries to call you a faggot and intimidate you, nothing shuts them up quicker than showing up at his practice, out lifting him, and being closer to the varsity team than he is.