It's not supposed to be a slight at the French. It's a "polite fiction" - the user of the phrase is pretending that the swear word was a (non-offensive) word in another language, and the other party is pretending to believe this (since of course they are so pure that they have never heard the word in question before). Both parties of course know exactly what is going on, but the device allows the first person to apologise without implying that the second person is so uncouth as to know the word in question.
I thought it was always a part of the (possibly true, but I'm no francophone) mythos that French just has a much better swearing vocabulary. A statement like that, I'd think at least certain parts of French culture should get behind.
