The main problem with this belief is that if people aren't going to change their behavior with threats of temp bans and a permanent ban, why would they change their behavior just by being told to "be quiet"? That's like instead of punishing someone you just give them a slap on the wrist. That actually encourages the behavior, because they know they will not be punished when they do something wrong.
Many times over we have tried to talk things out with a member who is misbehaving. The result? They continued to do so until it exhausted those in the global chat and they were telling the patient mod that the person simply deserved a ban already because they weren't changing. Trying to talk things out doesn't work in situations like these, the only remedy we really have is a threat of punishment, i.e. a temporary or permanent ban.
It is true that members going "Oooo, you said X word, I'm going to tell a mod!" is wrong, I hardly see anyone doing that. So I don't know where you're seeing this, because I hardly see that at all. I have of course seen people tell others to stop griefing, or stop cursing before they tell a mod. In which case this is appropriate for them to do, because it is a very serious thing for the person to be doing, and it's not "tattle-telling". All they're doing is trying to help out a person realize that what they're doing is wrong, and if they don't then they're helping the mods by pointing out said person so the mods can try to stop them or punish them if they don't stop.
I don't really see any spam in the "report users" forum. I only see a new thread in there perhaps 1-2 times a week, which is far less than what we used to have when we had less mods here. And almost every thread in there is legitimate and not "tattle-telling" at all. Simply mature members helpfully getting screenshot proof for mods to see that someone has been breaking the rules while a mod was perhaps AFK, or no mod was there at all, so that the person doesn't get away without any punishment for the behavior.
Lastly, this is a family-friendly server, period. As such any bad-language is not tolerated, considering we've had people on here as young as six years old. They don't need to see any bad language, especially on something like a friendly server where they're just here to play. We also don't need their parents to be glancing over their shoulder, or playing beside them, and seeing that people are frequently using curse words. If they see that then they'll want their child to stop playing on the server, for fear that they'll start to pick up and use the words. We don't want people to have to be subjected to seeing foul language on the server, nor for them to have to stop playing because their parents saw such language being used on here.