Hi catlover2, yes Gracie was the boss, but they were always sleeping together and grooming one another as you may notice in our photo album. She was always making sure things were going her way, but in a more comical way than anything. She has never been downright cruel to him before.
I really appreciate your suggestions. Charlie was my first cat and I felt like everyday was a learning experience with him, but getting Gracie just seemed meant to be; so peaceful and enjoyable. They used to work so well together and it angers me to no end that I have broken that bond between them. There is so much upset in our home now, for both Charlie and Gracie; its sad to always have one of them secluded from everyone.
I guess we will work on the small details such as spending a lot of one on one time with each of them and getting her spayed immediately! Disciplining Gracie at this point is completely ignored, whether I say her name sharply (which she always used to respond to) or spray her with a water bottle, there hasn't been anything I have been able to distract her with yet, physically separating them and secluding her.
Thank you to everyone who took the time to give all the very helpful pieces of advice to help our now, quite distraught little family...