I think this has gotten way too much press. It's been known that people swear in games for a long time (and not just on Xbox Live). The only reason this is interesting is because, for the sake of "research", he wrote the frequency of what everyone said. There is a reason for that stupid ESRB disclaimer for online games: 'Your game experience may be different online'.
This study was extremely limited to just Halo 2 (yet, in all of the stories linking here, it unjustly gives all of Xbox Live a bad name). The first iteration of Xbox Live had an ignore/mute list, report feedback, and file complaints. The new one has take reporting feedback to the next level with detailed breakdowns when reporting negative feedback and filing complaints. This shows up as "Rep". If someone has offended you, you should give them negative feedback so others will know to stay away from them and so your chances of every playing them again will be decreased. The feedback does stay on your record and you can see what people have given you (though it is completely anonymous). If your rep gets bad enough (or if a complaint was filed, they will be banned.
Also, you should pick the right zone for you, if you are offended at profanity, pick the Family or Recreation zones. I think the framework is put in place and it's up to the community to police itself (the way it should be, right?).