I have this reseller with 2 large sites. They're within bandwidth and space limitations but together his resold accounts take up more than 50% of the cpu and memory bogging down the server. Should I get rid of him and tell him to go somewhere else?
You should have a clause in your TOS that allows you to handle such situations. A good TOS would mention something along the lines of "accounts severely affecting the performance of other customers may be subject for review" etc. Your TOS should also allow you to change your service agreement with your customers.
Try to upsell him to a dedicated server, explain fact one is his sites are busy, and that may or may not be good. I would offer options 1 and 2, streamline efficiency (less likely) or get a dedicated server from you. Be very helpfull about it and be concerned. Remind him that this affects all customers and his also, so his other sites are also suffering as a result of the resource hog ones...
I think there are a few missing points that need clarification.
How big is the Reseller account?
What are the server specs?
I notice you have Reseller accounts that allocate up to 130 gigs. If he has one of those I don't believe it's inconceivable for him to use 50% resources, especially if you have him on something like a P4 with 512 RAM.