My DS is a bully.

I just don't know what to do about it.

I keep hearing from everyone (My mum, well meaning friends and relatives) that he NEEDS to go to daycare to be "socialised" on how to act around other children...personally,I feel it would just make things worse...
He is not a bully to me or DP, its only other children, doesnt matter if they are older, bigger etc. DP and I don't hit him, or each other, he doesnt watch violent tv shows, I give him PLENTY of attention.
I always intervene and now watch him like a hawk when around other kids, but one thing I have noticed and that scares me a little, is that if the child cries, or whines, and comes up with "Jacob hit/slapped/pinched/scatched me" he will keep doing it. and laughs while doing it, like its all good fun.
He tried it on his 7 yr old cousin the other day who started pretending to karate chop him, then laughed and ran away, Jacob thought it was hilarious and has never tried it again?
I just don't know, Im scared he will really hurt someone.
I can totally empathise with those of you whose children are similar.