Life's a Bit** and Idiot Part Deux

Well the other day my youngest daughter was playing a little game that lots of kids play when they are learning to read/write. She did the rhyming game. She started with the the word "Witch"..yes I know you know where this is going. So she says "ditch, bi...." To which my oldest daughter yells "Oh that's a bad word. She said a bad word." My husband and I wondered how she even knew it was a bad word to which she replied "Well 2 of the boys at school call each other that and one of the boys told me it was a bad word" I guess, according to him, they say bad words all the time. So my oldest daughter had to jump at the chance of telling the parents that her sister said a bad word. We proceeded to tell them what the B word meant and that it was not a nice word to call people. My youngest responded: "Well what if I want to call myself a bit**. Can't I call myself a bit**??" We are working on this one.
Then today my oldest asked me what idiot meant. "I thought I told you already, someone who isn't smart. Why did someone call you that?"
"No" she replied.
"Well did you call someone that?"
Pause... "well. I sit next to two boys mom and they are just really annoying. So I said-'Here I am, sitting between two idiots'."
"What did they say?" I asked
"One of the boys said 'Oh yea, well you're a moron'."
"Well I guess he gave it right back to you. What did you do?"
"Just laughed."
Hmm-we are working on this one too!!!