Hi K..... I too have "the hang out house". Personally I want it to be that way and would never want it any other way. I've interviened in MANY MANY conversations and I have always been there to talk and teach the children that come over about right and wrong behavior and speech (I figure they are in my house and my rules go. Besides, some of these kids will never have the fortune of parents that even partially relate to them).
I've been fair and understanding. I know kids are growing up WAY too fast!! They have talked about sex and kissing. And in those time I've called the child over to talk, I haven't attacked them, I just say plainly...."Sex is a beautiful thing, it is sacred and it's meant to be shared by two people ( a man and a women) when they are married. It is the way God intended, anything else is no good, So I ask that you talk about other things." That's the first time warning I give.... When I'm feeling particularly mentor-ish.
Otherwise it's Noah my son who I bring in the room (with me) and I ask him what he and the kids are talking about, I then ask him if he is being Godly and speaking things that please the Lord... He goes in the other room and I hear with my ears the conversation no longer is centered around whatever topic it was before.
That way You teach YOUR child to handle talk like that and not to just GO ALONG with the crowd and take part in (really) grown up talk.
As for my kiddos...I homeschool, and they are not in the mix, so the kids coming over often are neighborhood kids, I meet their parents right away and spend time with them....chatting and dinners...I try to include them in my life.
But I advise you, if ALL these children are not the element you want for your kids and nothing works...either get really busy...(know what I mean) and find other outlets for your children to meet peers...ie youth groups, TaeKwonDo(that's what we do), mom's groups, athletic activities,etc.... or move.
I definitely feel your frustration, but I see this as a great oppurtunity for your children to grow into leaders and grow into people with integrity. Use it. Don't run away, but also gauge the degree of influence and act accordingly. Your children will take your lead. Charge on sister, Your kiddos are young now, you got that on your side. May God bless your steps.