Just to answer some points... Yes the ex-student is still allowed to train at the club, he was there last night! In fact, he was the senior student on the class so sat at the top of the mat (again, this is etiquette here, everyone lines up in order of grade) although I know this isn't something he likes doing - sitting in order of grade that is.
Apparently there's a meeting been called for the students above first kyu to attend and this situation is going to be discussed on Thursday night. However it seems that it was announced on one class and then people have since been told by certain instructors in a hush hush way.
Will post back after Thursday! I hope this is all resolved nicely and they do the right thing by him.
Which brings up an interesting point concerning the "banning" of a student. How would the sensei enforce such a ban? I mean suppose the student was very determined and just kept showing up for training, of course assuming he is paying the appropriate fees.. The process to prevent this could get legally complicated.
On a side note, if things are being discussed in hush-hush way it sounds like a lack of leadership on the part of the sensei.