Typically if you're having this kind of issue, you can do one of the following:
* Mute the player so that you no longer have communication with him/her
* Ask the player to stop ( ...it's worth a try )
Unfortunately, with parental permission if under 13, children can play on Xbox LIVE. Depending on where they live, they may also be able to play Halo 3 (parents love to buy children games, but little do they know that some games are highly violent), and there's really no way to solve the issue except for the LIVE "age-gate" and child locks.
Also: It is not racism. There will be trash-talk in your games. You just need to learn when enough is enough and mute the player. Have fun :)
@CSMarathon: Trash-talking is not against the Xbox LIVE Terms of Use or Code of Conduct. If the player is harassing you constantly and takes it to a personal level, feel free to file a complaint on the user.
[Edited on 09.04.2010 11:35 AM PDT]