First: Most of the guys who people think of as being too-good-to-be-legal in GG have never been banned. Those rumors get started whenever one of them takes a week-or-so long break, and always becomes a target of immediate amusement in our chat channel.
I currently hold the GG record for most-banned member, and every one of my bans has been for saying naughty things to other players. (Every disciplinary measure was well-deserved, I'll note, and I have thoroughly learned my lesson. Scout's honor.)
I believe that's mostly true, but a handful of their members have been suspended or temporarily banned. I think most of the very active/strong guilds attract that personality, though. They're beatable, and when things start going wrong for them, weird things happen.
That said, I don't think they really have any impact on the vibrancy of PvP on the server. Most of the problems are due to low number of queuing players, underdeveloped matchmaking, and lack of cross-server queues. Those aren't problems that can be fixed by talking about Empire and Game Genie.