How about using some "reverse psychology" on packet encryption? If you're good at it, you can detect the packets responsible with - say - death in-game (you being killed by an enemy) and "inverse" it (am I shot at? yes - return damage to user ID shooting at me). This way they would die when shooting you..
The above can be used to detect common hacks. By studying the packets behavior, you would turn every hack in auto-death caused to player trying to use it
Better than banning them :P
Am not sure under what circumstances it can be achieved under Punkie..