I think you did everything right but I too would second guess myself about the lovey. To me, it's the one thing that comforts or provides security to him. Whether that is truly needed or not I don't know but I have issues with not allowing a comfort item...but that's just me.. I feel like it's the transition piece for a child in a new environment...kwim?
I would however remove a privilege or a special activity from his day when he misbehaves. At 3 I might have warnings, or advance notice type methods but at 5 (unless developmentally delayed) he DOES know better when it comes to hitting and to listening to adults.
I would break down the day into smaller parts and during each part, have something fun planned that he may look forward to. ANY time he misbehaves I wouldn't even warn him, I wouldn't inform him either. Telling him he lost something "coming up" will incite the scream fit... so I would just be pretty short and blunt and then when the time comes to do the fun activity or have the special thing, tell him he "SHOWED" you that he didn't want it, isn't old enough or didn't care about it by his behavior. Rinse and repeat....most manipulative 5 yr olds figure out pretty quickly that the tools they use at home (screaming fits, ignoring etc) don't work as well at daycare.
Finding his currency is always a good starting point but removing his power to influence, annoy, hurt or be rude to others seems to have a lasting impression. Manipulative kids with behavior issues have been some of THE smartest kids I've ever dealt with...
