Filters should exist in most games that would be accessible to young people. While it's true that they probably know what the 'bad words' are, the last thing a kid needs is to have a parent see all kinds of expletives on the screen.

I remember when I first started using IRC years ago, there was one particular server that had 'prison' in its name. My parents saw 'Connecting to irc.prison.whatev' and freaked out. Some parents are hypersensitive to what their kids can access.

Language Filters are in games particularly because of parents and kids.

As far as making things more civilized, I don't know. It wouldn't bother me if every 'lol' I typed transformed into something less l33t. I don't think it's nearly as vital as a foul language filter.

Also, Xbox Live allows you to leave feedback for 'abusive language'. If the offender continues to cause a hassle for other gamers, they can be banned.