I am Fairly new and do not know the person in question but how about this, Why not make him do some sort of community service in game, such as helping new players or something to that extent. I do not like the idea of taking away his items or levels because I personally am always attached to my main toon and usually love everything about him and his equipment always reminds me of the challenges I have gone through, I do not know about zhak, but I have kept items on me at all the time that reminded me of a good friend in game or an event that was particularly hard or memorable.
I do think that everyone deserves a chance to prove themselves, Besides if he wanted to come back to the server and replay he could use a proxy and recreate a toon. I see that it is a vast majority that does not mind him coming back. I think that a form of community service is needed but as far as making him replay I think that is unneeded punishment and more likely to make him bitter at the gms and players who overdid the punishment.