Let's cut right to the chase: I think the idea of "bad words" is bullshit. There are certainly plenty of parents that would whole-heartedly disagree with me, and I just couldn't care less.
Here's the deal. The idea that certain words are inherently bad is just idiotic. It means we've arbitrarily given this little collection of letters some mystical power over us. Sure, words are used to communicate, and sometimes we want to illicit a powerful response in our audience, so word selection is key. But context is everything. And it's easier to just tell your children that "shit" is a "bad word" than it is to explain when it might be acceptable to use the word and when it is most certainly not.
"But, if my kids just don't use those words, then they won't make a mistake and use them in the wrong place. I win!" Yeah, and you could probably build a house using a rubber mallet and a garden trowel, too, but that sounds like a really shitty idea. Words are tools; sure, you can get an idea across using a limited subset of words, but why? Ask an experienced engine builder to set you up with a racing engine, but tell him he can only use that cheap Stanley toolset you've got under the sink and see how quickly he tells you to go fuck yourself. And don't even get me started on the "I limit my vocabulary so I don't have to think hard" idea. It's not hard.
We even make up little names for these words, just so we don't have to say them. As if that makes it better. "Hey, don't say 'fuck'...you'll lend it power. If enough people say it, it will rise up and take over the world." No, let's call it the "f-bomb" instead. Because that makes sense. "Don't say the 'n-word' or the almighty Zeus will shoot a lightning bolt up your ass."
The only power any given individual word has over you is the power you give it.