Shouldn't Isn't

I was watching the movie Australia on the plane the other day (terrible movie, BTW) and an exchange between two main characters got me thinking. At one point Hugh Jackman says something like "that's how it is", Nichole Kidman responds, "That shouldn't be" and Jackman's reply is simple and great (especially given the total lack of original thought or dialog elsewhere in the movie) "That's how it is."

How often to we live and operate in the should/shouldn't rather than the is/isn't?

For instance, if we find ourselves in a conversation that we know we shouldn't be engaged in do we stop or simply say (either outloud or to ourselves) "I really shouldn't say this, but..."

When counseling or encouraging, do we base what we say on the reality of the situation or do we work from a position of what should or shouldn't be?