Oh phooey on the "time-out" business. That didn't work so great with mine. I got more results from taking a prized toy and putting "it" in time out until people shaped up.
If someone challenged, sassed and fussed to the point where serious action was needed, Winnie would find a new perch on the top of a tall bookshelf, or Thomas the tank and the Island of Sodor (anything on the playtable) would get put in a box in the closet for an afternoon.
I'd let them know how long stuff would be removed, and tell them things had better improve by xxx pm today, or Winnie or Thomas wouldn't be coming back til tommorrow (or whatever). Sometimes they'd have an all out tantrum. Usually if they think you'll give in. I'd just calmly tell them the more they have a fit, the longer the item stays in "time-out". I further say, if they can start behaving, and apologize or remedy whatever they did to get the punishment, I'd consider shortening the time and would give them the item sooner.
I'm telling you, this works. It's rough the first few times, but after a few "time-outs" they start to get the idea you mean business, and the outbursts do diminish greatly.