Vocabulary Games

I used to say a word (like one that we read in a book) and then go back and forth using different words for that word. I also would go on "dictionary hunts" and look up words in the dictionary that had fun meanings. You could have a word of the day where you challenge him to use the word at least 3 times during the day in different sentences/ways. Sites like http://www.vocabulary.co.il/
http://jc-schools.net/tutorials/vocab/
http://www.abcya.com/first_grade_computers.htm
Are ones I've used with my first graders - if he likes the computer!

A thesaurus could be fun.

Also, head it off. Be clear and firm that those are words which are unacceptable and there will be clear non negotiable consequences if he chooses to use those words - at all - not three chances. Then make sure the consequences (which you have thought out ahead of time) really hurt - ie what he really really cares about. A toy - gone until no swearing for 3 days - swears on day 2, day count starts over. Boys esp. need fewer long winded explanations and more clear stark boundaries.

Apples to Apples is an excellent game.
In terms of forbidden words - that is totally normal at his age. Don't over-react, and don't laugh - simply look right into his eye and say, that is not an appropriate word for a 7 year old. If he's just being silly, let that be that. If he's using inappropriate language in a situation - frustration for example, turn it into a game of finding fun sounding but appropriate examples. If he is using the language as name-calling, have a discussion about how that is not ok and hurt's people's feelings, and so it is not funny.
Also, you can have him create "Dr. Seuss words" - non-words that he can use and can sound WAY more funny than "forbidden words". Read to him "There's a Wocket in my Pocket" and come up with fun words afterward.
Good luck!

Teach him to play Mad Libs, get one of those books

A to Z, Jr. is an amazing game, also Wiz Kidz, both from Discovery Toys.
www.toysofdiscovery.com

We have always played a lot of Scrabble in my house. It is always a good opportunity to learn new words and learn how to use a dictionary. We "bend" the rules by allowing more dictionary lookups than you would normally in a regulation game. It has been tremendous fun for my now 12 year old who has played since the age of 6. I beat him by ONE point the other night! And this was with very little help from me. I expect that he will be beating me soon enough. And I was a regional spelling bee winner! Good luck.