I know what knights and admins are supposed to do, but how are they supposed to act?

Example:

If a mod belittles an entire forum of users for their elitist attitudes. Whether it was done in jest or not is irrelevant. It certainly was not taken in jest by users who complained to the moderator about it, and he/she did not apologize in the thread or delete it.
He/She later had problems with another user who was sending her profane e-mail through the EoFF boards server. He/She was right to request that he be banned. He was banned. Unfortunately, his IP range is so wide that such countermeasures do not work very well. He returned to the boards and angrily complained about what happened. The mod became upset in the thread and referred to the user alternately as a "f***ing troll", an "f***ing pervert".
I suppose common sense is part of being a mod, but if it really hurt the mod on a personal level?

As for the administrators.
In the example mentioned above, the mod responds in kind because he/she is hurt and angry.
What should the admin do?
Should it be...
Inappropriate, over the line, without restraint. Moderator status removed.
Or...
Give the mod a warning and let it pass?

Here is the reality....(at least that's what I think)
He/She will never be reinstated as a mod. If he/she was, it would completely undermine the Eyes on Final Fantasy message boards credibility.


EDIT:
...I know I know... I'm not asking for help... bleh