Family Home Evening

So we had a family night on love at home and being nice. Little Miss Gracie Jo has been hitting Lucy whenever she cries so I thought it would be appropriate. It was fun and I drew this funky picture for us to color and I was feeling like I got the message through. Ya. Right. Next day Lucy was crying and I ask Gracie, "Did you hit her?". "Uh-huh". "Go in your time out". "Okay". She didn't even bat an eye. How do I get the message through to a two year old that you don't hit? She honestly is the sweetest little girl I know, and yet at times is a little sassafrass! I love her like crazy and I sure hope she turns out alright and that I'm doing okay at raising her! Sometimes I dunno! Her and Lucy are my biggest joys and I want the absolute best for them. So I'm game for any advice on ending this losing battle I have going on here!