@tarakesh,
That's really young for "just letting them work it out," I think. If I were C's mom, I'd definitely be stepping in and preventing him from doing the push down/ take ball thing. Especially since they're a year apart, and especially at that specific age -- two and a half and three and a half are light-years apart.
That said, I don't think you need to worry about generalized bullying at this age. Kids that little are still very much learning what is and isn't appropriate and there is going to be some rough-housing. I don't think you've made him a target or that you should cease telling him that it's not good to push/ grab. It's unfortunate that your message was contradicted by C and his laissez-faire parent(s), but not necessarily a big deal.
Is S in any sort of preschool situation? That really helped my daughter fine-tune what was and wasn't acceptable roughhousing -- semi-structured playing with one set of adults who imposed the same standards on every child.