I find very little more offensive to me than a human who abuses any animal and perhaps most especially a bird. Macaws are my specialty in bird rescue, nutrition and behavior modification. They are sensitive, smart and loving birds. They are also very forgiving, though they may never forget their abuse.
If you think about it, with another 50 or so years to live, this macaw is still relatively young and has plenty of learning ahead. One of my most successful rescues, Sadie (she's also a permanent resident) came from a similar start in life. That f-bomb wasn't the only enthusiastic statement she made. The thing about parrots is that they don't necessarily know what they're saying, they only know what they've heard said with enthusiasm. So replace that word with something else said in the same tone.
When Sadie yelled that word, I'd mimic the volume and the tone using "LOVE you!" instead. Then I'd approach her saying it again, a little softer - and finally talking to her in a usual voice until she relaxed.
The children issue is a more difficult one. Most birds will react with hesitation or fear around a child, but it's not necessarily because they don't like them - it's more that they can't 'predict' them. A child's movements are sporadic, their facial expressions are more animated and even their eyes dart around more than adults (or older children). Birds see the most subtle of changes and movements - and unpredictable is not a good thing in the bird world.
When Sadie first came to me she was considered a "problem screamer and biter". She did so much damage to me that I had ice packs and bandages on both arms every day for just over a week. She still has her moments, but she's certainly not a screamer anymore and I've used her successfully to introduce children to the marvels of macaws. She will stand on their arms and be very patient, which is something no one would have believed when she was given up.
Here's a page with more about how to modify a 'problem biter'
http://www.4animalcare.org/birds.html (under 'screaming, biting, bird hates you?')
In that you've been devoted for so long already, I believe you can do this (the water bottle thing, well, let's reserve that for only the most necessary of situations, more as a distraction and not as a discipline, ok?)
We'll take it one step at a time.
Let me know (just re open this question to follow up)
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Dogs, Cats, Critters; Animal Care author; Behavior & Nutrition.;Cert. Avian & Opossum Specialist;