@froggyloggy
Not sure if you will read this, because you seem to have checked out of this thread, but I just wanted to add my perspective.
I was 'Ethan', and the reason that your son is being influenced by him is because his resolve (for whatever reason) is weak. Ethans pray on kids that have weak resolve, they can smell it. Kids like Ethan feel out of control at home. They might be abused, their parents might be unstable, or some other factors have led to them seeking something, anything, that they can control. I remember looking for children who lacked confidence, were less spirited and eager to please. I could control them in the same way that I was being controlled at home, it provided some relief. That didn't mean that I had magical powers to control every child in my class.
From your posts, it sounds like you are low in confidence. You get easily defensive and look for ways to disprove what people have said about you or your DS; you're not confident enough to separate criticism about a particular issue from an attack on you as a parent (though some posters have definitely attacked you), and I suspect that this is rubbing off on your DS. You are not a bad parent, you are a lovely parent who is concerned about her DS and would like some opinions on how to stop him from running with Ethan. This thread has derailed because people have been (in a very Ethan like manner) preyed on your lack of confidence, resulting in you feeling like you have to be in fight or flight mode.
You don't want to make DS feel bad, you want him to be happy and nice and protected. This is lovely, but I would be able to suss this out easily and use it to manipulate. I think the main thing you need to work on with your DS is not punishment, but self-confidence and assertiveness. Strong-willed children are more difficult to manipulate (strong-willed is not the same as abrasive or badly behaved) and will do what they want to do, rather than what someone tells them. Basically, you need to nurture your DS independence and help him voice his own opinions. He needs to be his own person.
Your son may not be a bully, but saying mean things to people is bullying, whether he is being influenced to do so or not. You made a comparison to Hitler influencing grown men to do bad things. He did, he influenced weak men and women to do bad things, and those men and women went to prison or got shot when the allies won the war. You need to be careful not to focus too much on Ethan, or your son may end up becoming collateral damage.
Other posters are right when they talk about external locus of control. Be careful with how you talk about Ethan; you don't want to reinforce the idea that your DS' ability to not be mean to others is somehow out of his control. Funnily enough, this is exactly how Ethan justifies his own behaviour "I know it's bad, but I only suggested it, it's not my fault that he is willing to do it. I did not do anything." Regardless of your personal feelings, never give your DS the opportunity to think someone else might be at fault for his behaviour, this strengthens his ability to deny responsibility (all people love denying responsibility if possible, you do, I do, your DS does) minimise the opportunity to do so.
You need to improve your DS' self-reliance and stop reinforcing the idea that everyone has a reason to be hurtful or mean. They probably do, but they are also just being mean. It's inexcusable. I had problems at home, but I was (and perhaps still am) also just a bit of a bitch. Your DS needs to accept this and become a better judge of character.
I don't know how independent your DS is at home, but let him make more decisions, ask him for opinions and develop his sense of self. He obviously knows the difference between right and wrong, most people do. Ethan does. You need to develop his willingness to act on these morals. Help him become assertive and make his own choices. Don't just take away access to Ethan, Ethans exist everywhere and at every age. Improve your own self-confidence and project that onto your DS. He'll soon gain enough confidence to make his own decisions on who to follow and who to avoid.