We are very non-clothing-conscious here. Oldest dd (9th grade now) is in a phase, I guess. But the rest of us (adults and kids alike) are pretty open-minded. That said, I am NOT in need of a smack or whatever, just because my dd8 has athletic shorts with words on the Butt. We bought them for her for dance class, and she wears them. I don't think Giant Letters across someone's rear is in any way suggestive or attractive (the opposite, in fact)...and since I am not THAT picky about clothes, we don't stress about words on the rear. Even my dd had a yoga+hoodie set that had DANCE on the butt, when she was 2-3 yrs old. It was cute and comfy, warm, and good washable fabric so she wore it A LOT.
My limits are no bare midriffs, clothes that fit (none of the undies-hanging-out-the-back-pants-falling-down look), and no spaghetti strap tops to school (against the rules anyway). Oh, and my girls wear shorts under skirts/dresses (less risk for embarassment that way).
I must add that I don't purposely seek out pants/shorts with words on the butt. But if the pants/shorts that fit well and are comfy have a word on the butt, we'll not pass them by on sale!