Poor Willie, don't hate on yourself, you did the right thing er... actually no... Lydia did the right thing by kicking Rae out of the band. Rae was bad for the group. If Kim was here I'd suggest starting a new band with her as lead singer, because apparently she's the only other girl who can sing. (But I'm happy she's gone off to find herself somewhere.)
It sucks that the responsible leader of the band regrets the decision to kick out Rae as well as the verbal bitchslap. Hey, when you're the leader you have to make tough calls, and you can't allow anyone let alone the lead singer, to control your band or do whatever she feels like. Rae screwed up royally, (hell even Theo called her out on that one) and it's not only affecting HER life, but those of her friends and band mates as well.
Well, you know what they say about hitting rock bottom? The only way is up. I'm predicting that Rae is going to turn the record store into a band studio or something, and she's going to try to work her way back into Mouse and help Willie regroup the band. Wouldn't it be interesting if she regrouped Mouse and surprised Willie?