My niece, whom I do daycare for is the same way, she bullies my daughter and several kids at preschool. We've found, though, that she only bullies kids who are as big as or smaller than her, never anyone bigger. So she knows she's wrong and that if she bullies someone bigger they'll fight back. I don't know if it's the same situation, but we tried time outs and corners and naps and in the end we had to sort of use "do unto others." So if she breaks their toy, they break one of hers, or get to keep it. If she pushes them down, her mom tells the other kid to push her back... It didn't seem healthy to me at first, but it seems to have convinced her that eventually someone will fight back and she's backed off the bullying with everyone since then.
at 11:21 PM on Nov. 23, 2008