What a hard spot to be in, but the reality is your daughter has already learned the behavior so completely removing the boy from her life isn't going to help and the sad reality in todays world is is it probably would've happened anyways, so deal with it while she is still young and reseptive to her parents.Ignoring her behavior is a really good way to teach her it isn't OK to be mean let her know that that kinda talk and actions are not Ok and when she is ready to be nice you can talk later, most little ones hate this because they hate to be ignored, so don't react....
As to the little boy, when he is at your house and you hear or see something he does that isn't ok let him know that it isn't okay that you like it better when he say's "this" or "that". I don't care if the parent is sitting right next to me if a child is in my house or playing with my child I expect the same good behavior from them, but do it in a way that isn't putting the child down or the parent down, the kid really doesn't know any better so instead of looking at this as a bad thing look at as an opportunity to maybe be a good influence in his life, and he will learn what is accepatable and what isn't I have never known a child who doesn't......eventually.