J.,
I have been there! I have a 4 year old daughter and a 1 year old daughter. When the youngest was born it was a hard transition for my oldest. Not only was there a small little person taking away mommys full attention but my husband was also deployed. So the added stress was just not good.
What I found that helped with the transition was making my oldest feel important and helpful. I always gave her some task to do to help out with the baby. Whether it was as small as bringing me a diaper or burp rag to picking out what we had for dinner and helping me make it.
Praise is a very important part of this phase. Praise for whatever they do right. Try really hard to notice him being good to his sister or when he does something sweet for you, make a big deal about it. Tell him how good that makes you feel when he gives you a hug, kiss, etc.
Right now hes seeking attention and anyway he can get it, he will get it. I agree that bad behavior should not be tolerated and should be dealt with immediately. I find immediate and long term action works best with my oldest. The immediate punishment happening when she acts out and the long term being something maybe she wanted to do later that day that now she cant because she made a bad choice by acting out.
Also, they always seem to want your attention when you are doing something that needs to be handled NOW with the baby, ie nursing, changing diapers, etc. What my friend did (she has 1 year old twins and a 4 year old boy), was when she nursed she would read her son a book. Since it took a while to nurse anyways and the baby was "busy", she would take that time to do something special for him that she could do while being stationary. You could try the redirection like, "I cant help you find that toy now but if you get a story, I would love to read it to you. Then when I'm done feeding your sister I will be happy to help you find that toy". You cant help him with his immediate need but if its an attention ploy this might work.
But whatever you do choose to do, consistency is key. You have to be consistent with your punishments just as much as you have to be with your rewards.
I had a home visitation nurse after I had my small one and she told me that I should sit down and create "house rules" WITH my daughter with clear consequences to violations of the rules. That gives my daughter ownership over the rules because she helped create them and she knows exactly what happens when the rule isnt respected. Just a thought.
I know lots of suggestions. I'm rambling now. Hope that some of this babble helps. But I can tell you that it does get better. My daughters are the best of friends and the oldest has returned to her Diva self but shes so much better with me than she used to be. Dont get me wrong, she still gets mad and acts out, she is 4 after all but its not with the frequency or intesity that it used to be.