Assuming you gave him the opportunity to deal with this, (and are confident there was no provocation) - but he chose not to - then I don't think you were wrong to say what you did. I can't think of any sensible or reasonable excuse for her to use that term and it'd send a very poor message to your DS if no-one said or did anything and he therefore thought you were effectively condoning what she called him.
In an ideal world, then yes her dad should have dealt. But where they refuse to it's not fair that our children should become scapegoats. I actually think you were quite reasonable - you made a 'threat', but a perfectly acceptable one IMO, and didn't send her home straight away and/or impose some other sort of repercussion.
If your DH doesn't like you disciplining his child, then he should bloody well man up and get on with the job. Or does he think his daughter's choice of language is acceptable and your son's feelings are irrelevant?
Refusing to do that is, I actually think, pretty selfish because it's all about his fear of not seeing her. He's being emotionally blackmailed in effect if he allows himself to think like that. I always wonder why a 'relationship' (of sorts, any sort) trumps all else in situations like this - i.e. he'd rather kid himself they have a relationship even if it means the child calls all the shots and has carte blanche to behave badly towards other family members. Obviously, no-one wants to be in a situation where their child refuses to see them but this is one of those 'tough love' examples where, in the long run, it's better to impose some boundaries/expectations/rules now - even if it does result in a short term huff - rather than let them grow up completely selfish and inconsiderate of others.
You are doing nothing wrong in standing up for and protecting your child - it's what we are told, as parents, we should be doing all the time - letting them know we have their backs etc. And yet, so often, in step families, this simple and instinctive behaviour is frowned upon if it means 'upsetting' a non-res child whose behaviour is undeniably unacceptable. My personal rule of thumb, as you've also mentioned, is that if, hand on heart, I can honestly say I'd have dealt with my own children in a similar fashion, then I'm doing nothing wrong in treating my stepkids the same.