Yeah, given the general situation those soldiers are in, there's nothing all that surprising or shocking to me that one of them would come up with such a song...and that the others would laugh or applaud it. It's typical of the macho camaraderie of soldiers in the occupation of a foreign land.
What they don't get though, in my opinion, is...they are the invaders, upon false pretences, and they aren't doing Iraqis any favour. They are the enemy. Just like in Vietnam.