Tell the carers that "we are wtaching them, its all normal" is not acceptable and IS NOT NORMAL, regardless of what they believe. You want something done immediately or you will escalate the complaint to someone who gives a damn about the welfare of your son.

It nothing happens, contact the Dpt of Community Services (I think this is who monitors accredition for daycare centres) and ask what is your recourse if you can't get an acceptable outcome from the owner.

I would complain long and loud until I get some satisfaction. Your DS should not be unhappy because of the bad behaviour being condoned in this centre.

If all else fails, change centres and in your letter advising you are removing your son, list IN DETAIL, the appalling practices at the centre and CC a copy to the government department responsible for the daycares accrediation. Bullying is not acceptable in any way, shape or form. I would also mention that you would be advising anyone looking for a daycare centre that this particular one is not suitable due to their acceptance of passive bullying.

It is not your responsibility or your sons to try and live with or accept the bullying. I would explain in terms he can understand what you are doing to try and fix the problem. Let him know that nothing in this situation is his fault. Reinforce he is a wonderful little boy and some children are not shown how to play well.

Good luck.
ABSO-FREAKIN-LUTELY ...couldn't have put it better myself..(coming from a teacher who sees what this can do to a child)

and just to reiterate what another poster has said...DOCUMENT DOCUMENT DOCUMENT...any incidences from daycare to his dreams...if you need to play hardball, take your ds to a child psychologist to get an opinion...then present all your collections to the proper authorities along with the bill from the medical professionals.

FWIW: considering all the news in the media of late regarding bullying and the horrible consequences, they should be taking this more seriously..it all starts somewhere...they're little people whose experiences affect their views of the world just like they do you and me.