Remove it.

It's an overly restrictive and worthless annoyance that is easily circumvented in several ways. It filters out the most ridiculous and stupid things.

Fragment is filtered to fra**ent. Really? You really feel the need to filter gm out of the MIDDLE OF A FREAKING WORD? An abbreviation, I might add, that is MORE commonly used to mean GUILD master rather than game moderator.
Hooray (as in Hooray, it's Wednesday, the week is almost half done!) gets filtered to ****ay. Really?

Many, many more examples like these in the game...and every single time it occurs someone just retypes the exact same word in a way that bypasses the filter.

Remove the filter. We don't need it. At the very least, give us a config option to shut it off.