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.