Well, this can be analyzed a 100 different ways. There are subs who might just think there's nothing wrong with saying 'shut up', so it might not even be that the kids were rude. Some people think 'shut up' is a synonym of 'be quiet'. It depends how they were raised, but of course, common decency would dictate otherwise. I think it's better if you let the sub know in a non-offensive, judgmental way instead of just taking her off the list. This is a correctable offense, and if she's otherwise great, why lose her? This way she can also learn. Kicking it up to admin is too much. Just do what you feel is right, because 10 people will tell you 10 different things.
All this and the sub may not have even said "shut up". An entire class swore to their seventh grade teacher that we only completed one writing piece in sixth grade. Everyone agreed! It. Was. Not. True.
I'm much more likely to believe students about what occurred the day before, rather than three months to a year before.
I've cursed a few times in my first year. I liked the effect it had on my classes, one of which was out of control. Kids would immediately stop, and some of their mouths would be wide open. Then I stopped. It was making me look unprofessional, and I don't curse in front of my own child so why was I doing it in school. I use the countdown now 5-4-3. Send her an e-mail saying there were complaints. I'm sure she will stop. There would be more respect for substitutes if more staff members thought of them as teachers. I know some do as little as possible, but going to and fro I have seen many teaching their subjects , and managing their classes quite well I may add.