>I agree with this statement however it is our belief that those are not bad words that being said we have to teach him where and when he can say certain things.

It's easy. He needs to understand and accept the base rules of polite conversation before he can break them. And you can be straightforward about that. "Hey, other people don't like this and if you're gonna be saying it out of habit, we can't let you say it here, either".

>Teachers talk and pass their biases all the way up.

>This is his mother's fear. That the teacher will hold a grudge against him and give him a hard time all around.

Not just this teacher. It'll follow up to high school and compound over the years, in all likelihood.