The news story is in the public domain and a restaurant is a public place. While I can understand you not wanting your children to hear a graphic discussion of murder, you really have no choice except to move under those circumstances. Even then, if the murder occurred in your town or a neighboring town, chances are your children will hear about it on a tv broadcast, at a friend's home, or from a friend whose parents were discussing the situation in their presence. Personally, I'd want to be the one to discuss the situation with my children rather than have them hear about it without my input. I would have used the conversation to discuss what happened in a non-graphic way after returning to the privacy of my home.
When 9/11 occurred, my son was 7 years old. We didn't allow him to watch the images on tv but we did discuss the situation with him without showing our horror and fear. It was better that he understood from us what had happened rather than hearing about it and forming opinions without our input.
Sometimes, you just can't shelter a child from the realities of life. You can soften the reality, however, by using good judgment and discussing the situation in a calm, rational manner. Hiding it from a child once they have heard about it only heightens their curiousity and fears. If you won't discuss it, it must be really, really bad. That's not a good spin to put on any story.
As far as appropriateness is concerned, they were adults discussing a news story. They were well within the boundaries of acceptable public behavior unless they were discussing grisley details so loudly that they were disrupting the restaurant.