Keep up the talking, it sounds like you are making an impact. You might also need to get DH and MIL on board so that they can say the same thing. Even his kindy teacher?
I've seen books about things 'big boys' can do that babies can't, supposed to be for just that. Not sure of titles though - is it worth checking out your library?
Some sort of rewards chart - stickers etc for doing all his 'big boy' things - going to the toilet, eating dinner without being spoon fed etc
Also, can you praise up DS1 for being a big boy when DS2 is around? This is an awesome 'teacher tool' when you want to encourage good behaviour in others. Totally ignore the baby things he does (when you can) but focus on every little big boy thing he or DS1 (friends, school friends etc) does and praise, praise, praise! e.g. "I'm so glad you're a big boy who can help Mummy...." or "Wow DS1, did you write/draw/do that? You are such a strong, smart little man!" or "I love the way you're eating on your own/going to the toilet/walking next to Mummy" etc