There is a line, but not much of one. I personally think some things that offend some people are pretty funny. Vince giving the promo (McMahonism) inside the church was gold, in my opinion. And Triple H having sex with a corpse (pretending to, anyway) wasn't funny but it wasn't offensive either, it was just stupid. I think there is a line that can be crossed which something like mocking Owen Hart's death for example (not that this happened, just using it as an example), given that he died tragically on the show. However, what they did with Paul Bearer wasn't offensive, his death happened by natural causes in real life and they didn't directly insult him or make a mockery of the way he died in any way. Plus, his family was ok with it.
I'm more 'offended' when someone tries their best to shock people that they go to such ridiculous extremes that it's sad and cringe worthy to watch. Can't think of such an example of that in wrestling, but it exists in other forms of entertainment.