Well, seems like a tough spot. Since you said you gave up and ignore it does not mean the world can ignore it.
You don’t know if she was ill, worked an overnight shift, just got bad news, etc…
I’m not saying any of these things justify her using curse words towards your children, BUT she may have been in her lane telling them to shut it.
If the kids are going to argue then they need to play separately. Not only for your sake, and the neighborhood, but also for life because the way they are treating each other and being allowed is showing them a kind of normal- and you don’t want them to be jerks later in life (no offense by that please just trying to make a point).
Probably by the neighbor shouting at them it will make them quit. Maybe you need to thank her for stopping something you couldn’t.
In the end, unless it happens again or something worse is said- let it go. 