Butt used to be rude, now it isn't, it is slang though and teachers should encourage the correct terms... BUT if bum is acceptable, then so butt should be.
Sounds over the top.
Years ago 'fart' was terribly rude, not so now.
If you punish children for using slang words, then I think they're more likely to not differentiate between slang and swearing.
My 5yr old got a gentle talking to about his favourite word 'SHEESH' but not punished, he was simply over using it!
He got put on the time out step for saying "Holy Shit", very 80's I know, he's watched The Goonies, I didn't remember how many phrases have changed. 'Holy Mother of God' was, in the 80's not that bad, fart was rude. Now it's different.
I believe the teacher dealt with my son correctly, he knows the difference bewteen slang (and trying not to over use it) and swearing.