I wish I knew the context. In all likelyhood the usage was perfectly appropriate and the question is simply whether it was appropriate to broadcast it.
It would be funny if Bush were asked about using it, and he stood behind its use in context, saying "If the foo shits..."
He said something like, "Hezbollah has got to stop doing this kinda shit..."
He obviously intended only Blair to hear it, and did not realize the mic was on.
I thought at the time that it was interesting that the media launched into him for saying it, yet they were broadcasting it all over the world. A fine would be appropriate in my opinion.