Instead of going back a step, get a very tiny out time cage. Each time Luffy starts to bully, put him in the cage. Keep the cage in the room, on the floor so he can see the others having free range and fun. Have nothing at all in the cage. Keep him in there no longer than 10 minutes. And do this each time he bullies. While on the other hand, when you see him go to the babies and not bully, when he turns away from them, give him a yummy treat for making a good decision.