This is the second paper of a series where we study the clustering of LRG galaxies in the latest spectroscopic SDSS data release, DR6, which has 75000 LRG galaxies covering over 1 $Gpc^3/h^3$ for $0.15<z<0.47$. Here we focus on modeling redshift space distortions in $xisp$, the 2-point correlation in separate line-of-sight and perpendicular directions, at small scales and in the line-of-sight. We show that a simple Kaiser model for the anisotropic 2-point correlation function in redshift space, convolved with a distribution of random peculiar velocities with an exponential form, can describe well the correlation of LRG at all scales. We show that to describe with accuracy the so called fingers-of-God (FOG) elongations in the radial direction, it is necessary to model the scale dependence of both bias $b$ and the pairwise rms peculiar velocity $sigma_{12}$ with the distance. We show how both quantities can be inferred from the $xisp$ data. From $r simeq 10$ Mpc/h to $r simeq 1$ Mpc/h, both the bias and $sigma_{12}$ are shown to increase by a factor of two: from $b=2$ to $b=4$ and from $sigma_{12}=400$ to 800 Km/s. The later is in good agreement, within a 5 percent accuracy in the recovered velocities, with direct velocity measurements in dark matter simulations with $Omega_m=0.25$ and $sigma_8$=0.85.
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