Personally, if I got a warning containing "my game" and "my rules", I would comply very quickly. Nothing like a squeak slap from HiTech to ruin your day!
I've been there but not done that as a moderator in another game. Reason being that strict rules and oversight didn't allow it. But othgers have not faired as well. The temptation is great to squeak slap a player when he involves himself in arena dicipline. Nothing worse for the moderator than to have a bunch of players ganging you in the arena. It's a riot type issue. Somehow it has to be supressed. In times like these the player's best move is to STFU.
Also, moderators can get angry and wish to strike out, especially when the perpetrator has caused trouble in the past. It takes a lot of self control to avoid lashing out. Sometimes they fail in this restraint, or over react. But if they own the game they needn't be as burdoned with restraint (just a word to the wise).
A list of words or things players can't do is not the answer (there will always be the disclaimer that the company can refuse you service at will). Undesirable behavior can come in so many forms, it can't be pinned down (example: the auto-squelch thing). Such a list is likely to be too restrictive on the company, and just give players more ways to try to skirt the rules. Seldom does a player not know when he is flirting with trouble, when he finds it he should not be surprised.
A player can deserve a warning without swearing, by causing trouble in many ways. Intentional and pervasive non-game related behavior in the arena that causes a fuss among players can justify a warning (pay attention to this Shane... love ya bud, but you have gotten off quite easy). Disruption wears many faces.
It may be deserved, or the moderator may have made a mistake. Either way, what's the big deal? Like getting killed in the arena, it only hurts a little bit and you will live to fight again. Yes, moderators and game owners can be unjust, but the fact they must get involved is due to those toward whom you should direct your anger... the love muffines trying to ruin your game.