dtgreene: There's also one character who lowers your rep when she joins, so if you dismiss and re-recruit her, your rep will be low enough to not have evil characters leave. Unfortunately, this also breaks any romance you might have started with her (if that's your thing).
IwubCheeze: With that character though, you only lose the rep once you accept her into the party. You gain the rep back once you kick her out.
There is, however, one situation in which your rep can be decreased permanently. If you have 19 or more rep with her in your party, dismissing her will only raise your rep to 20 (because it can't go any higher), and re-recruiting her will lower it to 18, which is low enough for evil characters not to leave your party.