Watcher:
It also depends on where you are, and which societies you move in. For example, in our family if a child (below 12 or something) is even found saying "Allah ki qasm" on mundane things, it is a cause of severe reprimand.
However, in some other families, especially punjabi speaking families, the kids leash out with several swearings in a single sentence. Even adults are mixing each sentence with a multitude of swearing and realtionships with mother and sister. In fact, a particular swearing involving sister is so common, that people use it just to pat a friend on the back or to re-emphasize that prices have gone up or weather is very hot! (If you know what I mean).
One of my friends (A) was so sensitive back in college, that at one time, when one in our group (B) addressed him (A) with the same sister-word, he (A) quit the friendship with the other guy (B) completely in protest.
So, it all boils down to how you groom your kids and what sort of moral standards you adopt around them, to make them understand in clear terms, as to what is acceptable and what is not. School is definitely an influence, but remember that kids spend, on average, twice the time at home, then in school. So parents, especially mothers, have a higher responsibility to ensure that swearing and rude language is not tolerated in kids. This becomes kinda difficult if parents themselves, especially fathers are prone to careless language around kids.
However, rude language and profanity is not a malaise of kids alone. Adults also must refrain from it, as it stinks of crudeness (for want of a better word).
Re: western society. Can't comment much except that their morals are going to the dogs anyway. It was only a matter of time, before their language caught up in this race for decay.
Adios!
Don't Blame me...
C'est La Vie :)