[FilleBelle]

If the things these children say to your children bother you, it is your place to stop your kids from hanging out with them. I don't think it's your place to drop by and tattle on them to their mother. While offensive, I don't see as how a naughty word now and then is going to harm the neighbor's kids.

No need to let it go as though it were no big deal, though. You can totally address it with your own son, perhaps explaining the meaning of the word and why it isn't appropriate to use in casual conversation. Or, if you feel he's too young for that talk, you can go straight to the "That word isn't nice and we don't say it in this house!" version.