No, it would not create a world of pussies. It would create a word of nicer people, who do not feel the need to pick on others over petty issues. If anything, a world without bullies would be better. If there were no bullies, it would be irrelevant whether someone is a pussy or not, it just wouldn't matter.
Sure, bullies can inspire change, but in a very negative manner. For example, Gok Wan inspires change, but his methods are far more fair and encourage individuals to change because they want to and feel it would make their lives nicer. Not because someone is going to rip them to pieces every day until they do.
As for your list of reasons. Why should anyone be picked on for any of those things (except smelling funny-I agree with you on that front)? It is the choice of the individual as to how they behave and what they do. People shouldn't question that or be mean about it. At the end of the day, bullies are the ones with problems, because they can't deal with people being different to them.
Anyway, in response to the question the original poster asked, of course, bullying is a very bad problem. Personally, I have been bullied quite a lot. Its a really nasty experience. I was at the point of killing myself 2 years ago because of bullying... There is no reason to do it, if you cannot deal with people being individual, then you can go and live in isolation. Don't bring your stupidity and nastiness into other peoples lives. It can mess people up a lot. It can ruin your confidence, your view of life and your view of other people. I don't agree with anyone's reasoning for bullying, it's just plain wrong!