If they were acting in such a rude manner towards you, then you and that other pirate had full right to report those pirates. Just because the word "noob" is so commonly used, that doesn't automatically make it acceptable to throw it around at others, nor does it mean people won't get offended if you use it.
In short, yes, you handled that very well. Reporting and walking away was the smart thing to do in the situation, and I applaud you for that.
