Originally Posted by EntropyControlSpecialist:
We have an extremely intelligent 5-year-old that will start Kinder next year. The child barely missed the birthday cut off for entering into Kinder this year.
Over the past few months we have seen absolutely no improvement in this child's misbehavior. The child came to us purposely stabbing the baby dolls with the plastic knives to watch the other children shriek/get sad. The child would slam down other children's towers to watch them get upset and smile. The child would take items another child was playing with and hide them behind their back.
The child made friends with another child (opposite gender) 1.5 months ago. When playing with that child, the 5-year-old will behave slightly better. When that other child says that they don't wish to play with the 5-year-old the 5-year-old will sulk, act down, and do nothing. The child isn't immune to getting their own feelings hurt or getting upset when other children do similar things in retaliation.
Within the past 3 weeks, the child has begun to mimic all of the younger children's speech patterns. This is an exceptionally bright 5-year-old who is now saying in a 2.5-year-old's voice, "I no want the lellow block!" and smiling a great big smile when the child sees us look at them. The child likes to get under other people's skin and seems to enjoy negative attention. However, when the misbehavior is ignored nothing happens. The misbehavior doesn't stop or go away.
The child has also begun to lie. The child will say, "So and so slapped me!" despite me being in the same room and seeing that so and so did not slap th3 5-year-old. Change out slap with hit, kicked, pinched, and bit. This happens a few times each day.
We have tried time out despite me hating (yes, a very strong word) time out. It worked a SMIDGE, but I wanted to find something else. Time out really doesn't help children develop an internal locus of control and that's what I truly want for each of them. All of the other children has started to develop it (even the 2-year-olds!).
We moved on to praise, praise, praise the good behavior. That worked a SMIDGE, but only in our presence. If the child thought that they were off the radar (say, heading to the restroom despite us still being able to see them!) they would continue with the same poor behavior.
We have since moved on to hula hoop time. "Since you did X, you now have to sit in hula hoop time by yourself. Those who can't play nicely with others will have to play by themselves." The child gets a toy in hula hoop time and has to play solo. When at a seminar, the teacher said that was essentially redirection (redirecting them to an activity that they COULD do). At least, more redirection than time out.
It only works while the child is in the hula hoop. Once the child is out, it's back to the same old same old. 
Around the parents the child behaves horribly. The child is not an only child, but is the oldest. The child will interrupt the parent while talking yelling, "DADDY DADDY DADDY DADDY!!!" or will ignore what the parent said and attempt to walk out the front door or will hit the Mom in the face with a stuffed animal or will spit at the Mom while the Mom laughs and makes it all a joke. There is no discipline it seems like.
I am at a loss and it is wearing me down. 
That is really challenging considering he has been with you for awhile (yes?) and it sounds like you are investing a lot of time and effort into this situation. Are you SURE there are no special needs issues going on here?