Church Discipline? You've gotta be kidding!

Reconciliation and separation are two topics that just come up in the context of human life, and the church is no different.  Here's how Jesus commands us to handle these matters:
Matthew 18:15-18 (NKJV):
15 "If your brother sins against you, go and tell him his fault, between you and him alone. If he listens to you, you have gained your brother.
16 But if he does not listen, take one or two others along with you, that every charge may be established by the evidence of two or three witnesses.
17 If he refuses to listen to them, tell it to the church. And if he refuses to listen even to the church, let him be to you (KJV, "thee," Greek, "you," singular) as a Gentile and a tax collector.

This passage is often mentioned in the context of "church discipline." it doesn't fit there at all.  Matthew 18:15-8 is about me having a dispute with someone else, and what to do about it. So here's what I do, assuming I'm trying to get some mileage with a brother or sister over a personal dispute:
I go to him, alone.  I sit down and reason with him.  I tell him what's bothering me. If that fails, I go to two or three others, and get their opinion (Jesus doesn't state that, but it's pretty likely that if you go to one Christian about another, and discuss it with him, he's going to give you his opinion.  I would). Assuming they agree to go with me, I take them.  The three or four of us reason with the person who's sinned against me. He doesn't listen. I then have the right to sit down with the entire group that both of us are members of, and discuss it with them.  More opinions, and so on...assuming that the church agrees with me, the church group discusses the matter with the person who's sinned against me. If he won't listen to them,

the only thing that happens is that I ALONE then have the right to forgo any association with him. 

His relationship with the church does not change.  

In other words, he is now (and only at present) not my friend.  I can avoid him.  I don't have to sit by him.  I don't have to pretend to like him.

This is not about the church disciplining an errant member. It's about me having a personal problem with someone, imagined or real, and the process I must go through to stop talking with him, to stop treating him as a friend, to stop having him in my home.  

How do I know this is what it means? One word. In the Greek, it's "you" singular ('soi')
It's in the KJV this way: "Let him be to THEE as an heathen man and a publican." The word, "thee" is "you" singular, not plural.  It's not right for the entire church to "shun" someone because he or she has "sinned against you," and now you have a problem with that person.
Fast forward to the actual way we treat people.
We don't like someone because of some real or imagined sin against us.  We gossip.  We "go underground." We let everyone else know what they've done to us, and undermine them with our words. In other words, it's easy to use methods that we see in everyday society to hurt our brothers and sisters.  This passage is really about the offended person, and what he must do, the lengths to which he must go, just to avoid associating with the person who sinned against him. He must go to him privately.  He must take two or three others, once he's laid his case out before them. He must go to the church.  If the person who committed the offense won't listen, and IF THE ENTIRE CHURCH agrees, then it's ok for the ONE  PERSON "sinned against" to refuse contact with that brother or sister.
The "sinner's" offense doesn't necessarily affect the church's behavior toward him.  It only affects the one person.
Incidentally, what Jesus says here is permissive. it's not a command.  It's like, "if you follow all these steps and you still don't get satisfaction, then you have a legitimate right to treat this other person as a Gentile and a tax collector." This puts the people in the church, and the church itself, in the role of counselor and helper, to assist us in reconciling with one another.

The way this is usually done amounts to forcing the "sinner" to take a bath in acid.

The way it's supposed to be done is with two things in mind:

1. To keep us all in fellowship with each other individually.
2.  To keep the church itself close and of "one accord."

This process is much more difficult than it seems at first.  It requires wisdom (the person who's been sinned against may be dead wrong, and need to be counselled, or there may be a crime here that you have to consider reporting to the authorities), tact (you don't reconcile brethren by hurting one to help the other), and kindness (you don't harm either side, if you can help it). It also is somewhat drawn out, which gives everyone time to calm down and think rationally.
Most of us chicken out, and won't use the process the way it was intended. We also mistake the purpose of this section--get warring people together, get them to reconcile, even if it takes the whole church.

Note that how Jesus puts this doesn't:

1. Leave room for gossip.
2. Allow you to hurt one brother or sister at the expense of another.
3. Let you abuse or circumvent the process in order to get your way.

It does:

1. Rely on the wisdom of others, and forces us to present our issues to them.
2. Force us to a defined process that intends reconciliation, not excommunication (that's not even contemplated in this passage).