I think the most important thing is that he feels that he has is own toys and his own place. His personal toys stay in his bedroom and the "daycare" toys and in the daycare. There needs to be a distinct difference. What's in the daycare isn't his. Also, at 3 1/2 he can certainly go play alone in his room to just get away from it all. He doesn't always have to follow and be in the "daycare environment" all the time. It's tricky, but there are double standards when we have our own kids in our daycare.
Punish bad behaviour (keep doing time-outs) and I like the coupon idea of caught being good. Just make him feel special.
I hope things calm down. My son was always a challenge in my daycare and now after 5 years of doing daycare, it is MY daycare for the first time, since both my kids are now in school! Hang in there and good luck!