Both are pretty bad, but if I had to choose which is better, I'd say the first one. Children will, at some point in their lives, come across a situation so heated as to produce sharp tongues and painful words. It makes it that much worse if they hear it from their parents (who are supposed to be their positive role models), but the truth is that they'll hear it eventually. A child that grows up in that environment will probably turn out gossipy, rude and colourful in his/her vocabulary, but that imho is better than the alternative.
A child who grows up in the second kind of environment will grow up with an unhealthy sex life. He/she might become promiscuous, and that itself leads to a lot of bad things: prostitution, STD's, early pregnancy, etc. The child might have difficulty grasping the full concept of life-long commitment, or commitment in general, and that in turn presents a whole slew of other problems. If you can't commit to another person, you'll probably have trouble committing to a bunch of other things. And the worst part about an unhealthy sex life is the absence of love. The child might grow up believing that the initial thrill and the novelty of sex are the only driving factors in a relationship, and that once those two things are gone, that the relationship is not worth continuing. There is nothing worse, imho, than living a life without love because you don't understand the differences between love, lust, infatuation and commitment.
And just to make it clear, these are all rough generalizations. There are many many people in this world who have managed to come out of such experiences as good people with healthy family lives. I hope I do not offend anybody with this. This is just for the sake of argument. K, thanks. :)