Hell yeah. Ban the government. It'll be a message that you don't just commit coup d'etat in a democracy and get away with it. This is a good move, and I don't really see how it's a step back for democracy. It in fact, promotes democracy.
Corrupt leaders and dishonest parties have no place in a democracy. The people of Thailand are pushing this fact forward. Well, Thaksin Shinawatra didn't have the cleanest record, but a change of government from the PPP is a good idea, in my opinion.