putting aside the idea that you're kind of snuffing all possibilities of discussion with your threat at the beginning, I have a couple things to say.
As I've said before, I think you mods have cleaned up a great deal in the past few months, and you've continued to improve. The canning of Neophytal and Wonko spring to mind as recent examples of good judgment. That said, its a thankless job, and you're always going to get way more flak than praise, so you're going to have to live with it. Some people like to think being a moderator is some sort of status symbol, when its really just a position you take when you want to help out the greater community, and put that desire over your own personal feelings.
You're going to be criticized, and you just need to be able to suck it up and look at it to see what you can learn from it. Is the person in question complaining because you genuinely made a mistake? Or just because he has sand in his yoo-hoo and you've taken action against him because he's an idiot.
Your new reputation system is either "the new grey dot" or "The perfect fix" depending on the following: Do other people know that these people are in said group. I mean, does it smply remove their rep bar from their profile? Or simply prevent the person in question from seeing reputations and sending it themselves.
If its the first option, then it's just stupid, as it lets idiots hide how much of an idiot they are. If its the second, then it still shows everyone else how much of an idiot they are, while protecting their fragile egos from the ever-menacing red dot of doom, glaring at them from the bottom of their profile box.
Also, much like my solution to the avatar/sig work probem over a year ago, I point out a nifty little feature to all those who might have missed it.
Yep, you can hide your rep from yourself. Now you won't be greeted by a line of red dots whenever you go to your UserCP. Of course you would then need self control in order to not open it up again every time, but at that point its not the mod's problem, its yours.
In closing, mods are doing good even if we don't tell you so, and the rep system is fine as long as people can't just up and hide from their mistakes.
Also, if certain people are using it to flame others, then deal with the certain people. Last I checked, when a small group of people abuses a system other people enjoy, you don't scrap the system (This should also apply to a small group of people
whining about said system.)