Dude...What the Heck?

No joke, here's an exact rendition of our car ride tonight. Which, by the way, I had taken my boys to the THEATER at the Pikes Peak Center to add some CULTURE to their lives. And this is what I get in return:

On the car ride to the Center:
Alex: (holding a sweat band- don't ask) "Hey, this sweat band says "Grab your nuts!" ha ha, "grab your nuts!"
And they proceed to giggle there way into oblivion while I pretend I'm not listening - it's my clever avoidance technique when I don't actually know how to address something about my kids' behavior or words out of their mouths. 80% of me is trying to buy into the idea that if you make a big deal about something, it becomes a big deal, and if you don't, it won't. At least the slacker mom part of me hopes so.

Here's more:
Alex: Is darn it a bad word?
Me: Not really, but I don't want to hear you say it.
Ethan: Is 'What the heck?' a bad word?
Me: Not really.
Alex and Ethan: What the heck??!! What the heck!? What the heck??! What the heck??!! What the heck??!! What the heck??!!
(It's now I realize that "heck" is a thinly veiled euphamism for "hell."- Damn- I mean Darn, I think I screwed up.)

And this was our ride home:
Alex: Remember that dude at the top of the mountain getting ready to just jump off?
Ethan: What dude?
Alex: You know, that dude.
Ethan: Which dude? Which one?
Alex: You remember, that dude, that one that was going to jump off.
Ethan: The survivor dude? on that survivor show? (ref: Man vs. Wild on Discovery)
Alex: No, the other dude.
Ethan: Oh, that other dude. He's a crazy dude.
Alex: Yea, that dude is crazy.

WHAT??!!
Are these my kids? What is happening here? Am I a bad parent? Is this a slippery slope? Should I even care? Should I start homeschooling? Should I be appalled? Is my avoidance technique the right approach (it's certainly the easier one!) I try to tell myself that they are trying on words, lots of them to see how they fit, how they sound. I think it's their (toddler) way of separating and stretching their independence. But Goodness! Am I going to have to bail them out of jail one day?