Too Much of a Good Thing

Nathan is one of the most genuinely kind-hearted kids I know. He shows an amazing sense of empathy for his age, and always has. This being said, I don't know what's happened to my sweet little boy. He's never been one to act out physically, but lately he has been. He's been saying mean things to everyone around him, and I don't know where it's coming from, or how to fix it. I thought babysitting for his best friend and her brother would be a wonderful thing. They never fought over anything, and played together at school every chance they could. Now they can't be in the same room together without some 'tragic' thing happening. Because Nate's such an emotional child, he takes everything to heart. If he yells 'hi' to a neighbor and they don't wave back, he gets sad. If someone doesn't want to play with him, it breaks his heart. I know kids are not always going to get along, and arguing is probably health for their development. But god damn. The biggest source of frustration for him lately is when he feels rejected, and acts out. Today Nate asked his friend to give him a 'high 5' and "friend" stood there looking at him blankly, obviously ignoring his request. He said, "Please?" , and "friend" continued staring at him with an implied response of 'no'. I'm not saying anyone should do something they don't want to, but it started the day off horribly, and it's as if she did it for kicks. (I don't know the real reason behind it and it could have been perfectly innocent, but I have learned children are a lot more calculating than they let on.) So there went our Monday. Full of, "you're not my friend"'s and "I don't want to play with you"'s. (From both sides) It's constant. It's utterly ridiculous. And I am so beyond frustrated with the situation. I don't know how to get them to be get along again, and stop all this nonsense. I've tried talking to them individually and together. Nothing works. No matter how hurt Nathan is, hitting is absolutely unacceptable. He knows this. So he is cleaning up the basement by himself, and cannot watch TV for a week. He has been sent to his room. He has been denied activities. Nothing works. I'm sure in the heat of the moment he is not thinking about future consequences, but how can I get him to that level? I know it's not all him, but unfortunately he's more direct with his comments. So he is always the one in trouble for the fighting. My heart goes out to him, and I feel awful when I know he's just taken a blow to the chest. I try to make it better by offering to play with him instead, but he doesn't want me now, and I understand. I expect that he's not going to want to play with me over his peers. I just don't know how to make it better. The best friend he wanted to spend every waking moment with, is now here 40 hours a week. It's not the perfect situation I thought it'd be, and Nathan is definitely feeling the effects of the phrase, 'too much of a good thing'.