its an unfortunate truth (and a shame) that if mild language was permitted it would be abused. Personally I find it fun to invent cusses that are more baffling than insulting.... making the other person have to figure out if your insulting them or not is so much more fun that the F-bomb. As a plus, inventive cussing without swearing or insulting can give a boost to RP mostly 'cos I find it easier to do when in character.
On a different note... Aren't we attempting to represent a particular society when we RP? A society in which wars are going on. Mild racism should almost be a little expected whilst in RP, although not condoned. But then again, it would be all to easy for people to abuse.
Hypothetically Mild racism and language should be expected in RP, but is impossible to condone either in or out of RP for fear of abuse.