C.W.
I am 24, mother of 2 under 5 also, and married for 6 1/2 years and housewife.
My girl is 4 and my son is 2, he is more of the bully, lol but I dont think that letting them "duke it out" for a few will damage them forever. Im ok with the as long as no ones bleeding method! I let mine just work it out on their own mostly unless it seems to carry on a little too long. If thats the case then they are told\shown how to handle the situation better, then I tell them to go play alone for a while. if they keep it up then they get into trouble.
and if anyone else dosen't agree, and thinks I or (if anyone else agrees)we are wrong I will just comment that my childeren are both well mannered and are not bad behaved. They, like some kids, just have days where they will not get along at all :)