I would agree that talking to him seems the best suggestion. Let him know that those words are hurtful and he wouldn't like it if someone said that to him.

It is a pretty important life lesson to learn that just because we're frustrated, hurt or angry that does not give us permission to hurt others. Try to explain to him that insults do not help the situation, only make it worse. If he has something to say about a situation he does not like he has to verbalize it in a productive manner, this one shuts down the lines of communication.