you say they were playing a game? it could be that this child's imagination got the better of him. In real life, he may well know never to say 'you fucking idiot' to an adult, but in the land of make believe, normal behaviour rules get forgotten.
I am thinking here of my youngest son. He will come out with choice army battle like phrases when he is in the middle of a game. I think he might say something like 'you bloody idiot - run for cover' yet I know he would not normally swear at a teacher or other adult.
I am not saying bad language is excusable but I too think you need to cut him some slack. I assume this was out of character and a one off?
So I'd do a) say something to the child
Not do b) unless the child swore several times Certainly not do c) for now - unless the child's general general attitude was disresptful
And do d)
Not wanting to hijack, Blu, but I was thinking of starting a simlar thread regarding one of my older sons friends. I have known him for years and am old friends with his mother.
The boy (now aged 11) has always had a colourful turn of phrase, helped by his addiction to the horrible histories books, children's poems and fascination with bodily functions. He just likes language.
At age 6 or 7 dh and I witnessed him shouting 'cheesy penis' again and again and collapasing in laughter when in our car. I did tell him to stop, but apart from telling my son (afterwards) that I don't want him to use that sort of langauge in front of other people, I have let it go.
However, this boy now litters his articulate and quite gothic turns of phrase with fuck and cunt -and inventive variations thereof, and I feel I may have to say something to his mum. Very undecided though.