'Munichs' is a term I have never used in any context apart from discussions about my dislike of THAT song. However, judging by the fact that many Blues use it in a number of chants (e.g 'Town full of.... and 'Carlos Tevez is a Blue..') but THAT song is rarely sung by more than a handful of inebriated nobheads, indicates to me that referring to United fans as 'Munichs' means something different to THAT song. I don't speak for City fans, and as you can gather, I don't use the term myself, but I would suggest that it is used to have a dig about MUFCs dealing with the disaster and suppsed exploitationof the disaster. That's not necessarily something I agree with.
To sing about Heysel and Hillsbrough at a youth game that means nothing, and thus over-excitedness or passion cannot be used as an 'excuse', is quite frankly pathetic.
The thing is United fans get upset and angry when oppositions fans sing THAT song yet they are among the worst offenders for making offensive chants aimed at mocking disasters suffered by other clubs.