I would have thought reporting these users to Sony/Microsoft and perhaps a complaint to the respective customer services departments would have resolved this issue. I'm pretty sure there is plenty of stuff in the EULA regarding racist conduct to ban them. Of course unless they have a big gamerscore/trophy count and/or have paid for an upfront subscription it's not much of a penalty.
As for kids seeing this, you can't protect them from the morons and bigots of the world forever sadly.







