OMG, I could have been writing this, but my DD is only 3. Same words are bad language in our home, as well. Just explain that not everyone has standards like in your home.
We use other kids CONSTANTLY as bad examples. When my oldest was 3, we had used unruly kids as exmaples in restaurants so much that he saw a kid throwing a tantrum and looked at me and responded with, "We don't act like that." I smiled and replied, You are right. We don't. We are respectful to others around us."
In fact, we just sold our home and moved to get away from the awful kids across the street. We decided to rent until our kids are grown, so we can move if we get bad kids around us again. Our kids couldn't even eat dinner in the house without these kids playing in our front yard during dinner hours. I would NEVER send my kids across the street to play in someone else's yard when their kids are not out. I know I can't shelter them forever and I don't plan to. I just want them to be kids long enough. (We also started homeschooling, so now we have even less bad influences. Our kids are VERY social, but while they are growing and figuring our who they are, we have more influence. Once they have a strong ethical foundation, then I can worry less about these influences.
Reward her for being honest. Take her out somewhere and when she asks where you are going, reply, "I am rewarding you with a treat for telling me what that girl on the bus said AND especially for not lying to me or taking your DS. I am really proud of you for being such a wonderful daughter." Then, reiterate how proud of her, you are, multiple times during the outting.