I would have a sit down chat immediately with his teachers and the director. I would find out what the "policy" is on hitting, biting, etc. I believe MOST daycares offer an "incident report" whenever a child is hurt. Now, a little hand to hand combat won't necessarily result in a report, but I think you have every right to expect that the teachers are watching this child extra closely since he appears to be in a phase of hitting. Also, saying "no" and redirecting him is fine at 1 yr old, however if it happens more than an infrequent slap, then there should be some behavior modification like removing him from the situation, putting him somewhere to play alone for a few minutes or at least being firm with the "NO".
Personally, I think "NO" should carry a lot of weight. My 9 mo old will get a pouty lip and fuss whenever he's told "NO" because I'm not cutesy about it. I think "NO" should be "mean"/firm...not "Now now, no..."
Also, if your son is "being abused" by this boy or at least the object of his negative behaviors, I think you have every right to demand a report of what happens, how they handle it and what happened with the other child.
If your son is being hit you have every right to know about it...every time. And know that they are doing something to change the behavior of this little boy, including getting his parents involved so that he is getting the same message at school and at home that "NO" is not a cute word.
Then if there is an "incident" that involves bruising, a cut, ice packs, etc. there should be an "incident report" given to both sets of parents and put in this boys file. There should be some protocall about how many "chances" he gets before he's either removed from that class or removed from their center. Obviously this is assuming this is a safety issue, not just a little baby hard touching, needing to learn being "gentle". The day care director should certainly be able to tell you their policy and make sure that the teachers/staff is following through on documentation.