Well, for me, the funniest punishment in a game (of another PC) wasn't a Palladium product, nor was it by the GM.
A few years ago, my buddy was running Hackmaster. He had just allowed in his friend and his wife. Let me tell ya, the wife may have inspired some Shakespeare. She actually told my buddy, during game AND multiple times, that she would be at the next session due to a hangover. She also metagamed and bullied her husband and a 13 year old kid we gamed with.
We finally had the last straw when she killed the kid's character when he was temporarily transformed into a grub, AND she killed his protege before he could get him into the game. This actually caused the kid to start crying, because he actually thought the group hated him (I know... I know.... 13 and crying.. being "too old"). She then proceeded to say "The little **** deserved it!"
Well, another friend of ours was gonna join the game as a rogue or an assassin (I forgot which it was). Drunkie had tried to take down a monster whose sense of touch was switched with mine (there's a normal Hackmaster monster with that ability) by kicking it in the crotch with boots that made groin shots much more effective. I had decided to hire the new PC for 40,000 gold to assassinate this oerson and make sure she couldn't be resurrected.
The assassin kills the husband's PC (BTW, he did not do a thing to rein her in, not even saying the slightest thing) and hides the corpse in a bag of holding. The assassin the proceeds to change her appearance with a hat of disguise. Drunkie then metagames by going up to the person she's never seen before, and asking to look inside "his" bag of holding, looking for the husband's character's corpse. Long story short, Drunkie is assassinated, stored in the bag of holding, then burned to ash in a nearby swamp and spread to the four winds. Our groups cleric didn't have any spells that could help.
Ultimately, Drunkie and husband quit (because Drunkie said he couldn't be there if she wasn't), kid is reinstated as a PC, and the assassin character is suddenly a party favorite