Is "hey" a bad word?

A few months ago, Evan started using the word "hate" for the first time. Of course, Greg and I were disturbed by the sound of such an ugly word coming from our sweet boy. We told him that he should not say the word hate, as we explained that hate is a bad word. Because a three year old does cannot always hear subtle differences in the pronunciations of words, this explanation has led to numerous, and often embarassing, misunderstandings. Anytime that Evan hears someone uses the words "hey" or "hay," he thinks that they are saying "hate" and makes a rather loud accusation of profanity. (Evan does enjoy reporting the wrongdoings of others as well as him own.) This explanation also provoked the question, "If hate is a bad word, then why does Santa say the word hate in that dog reindeer book, i.e. Olive the Other Reindeer?" At first, we denied that Santa had used the word hate, but Evan is always right in matters of detail. He was able to produce the exact context with which Santa used the word hate. Santa told the reindeers that he hated to miss Mrs. Claus' Christmas breakfast. How do you explain the different nuances of the word hate to a three year old? I don't think that you can, and the confusion and accusations continue.