i heard this rumour too. i did a little research and it seems to be a misnomer. They have a policy relating to the '7 dirty words': shit, piss, f-uck, tits, cunt, cock-sucker and mother-f-uckers (the irony being that the average 3 year-old has a more advanced vocabulary). Any domain name containing one of the 7 dirty words is liable to be removed. Obviously milf isn't on the list.
I've had milf forward through frames to a sex website and haven't had any problems yet.