2 foolproof suggestions: 1. Each country to compile a "database" of insults that are culturally inappropriate. All contracted players to be sent on a one week training course before series to educate them. 1 warning, then a suspended sentence, then a formal ban.
2. Given this is difficult and probably stupid, turn the stump mics up throughout a match and ban all forms of sledging.
As highlighted by Steve Waugh and a number of INdians, this appears to be a cultural issue - so only one foolproof way to deal with it.