The item, which appeared originally on Stannage's late-night phone-in show on Manchester's Key 103 FM in April 2004 and was rebroadcast by The Hits in March this year, involved the war veteran calling in to support the invasion of Iraq.
The presenter then unleashed a tirade of abuse and prevented the caller from replying before cutting him off. During his rant, Stannage said: "I'm disgusted by you, I'm disgusted by people like you and the people who join up... you're a little sperm."
Other insults aimed at the veteran included calling him a "brainless little dickhead" and a "sad, pathetic, brainless little toerag".
Ofcom concluded the programme was in breach of two codes, one relating to presenters' views, because he had failed to give the caller a chance to answer back, and another relating to taste and decency due to his abusive language.
In its ruling, Ofcom added: "We remain concerned that this item had been chosen for rebroadcast by The Hits."
In its response, The Hits said the presenter was well known for his "robust, provocative, challenging and occasionally argumentative style" but acknowledged he was wrong not to give the caller a chance to respond and that the comments may have caused offence.
The Hits also apologised for failing to identify that the item was "unsuitable for re-transmission".
Stannage is no stranger to controversy. In February this year Key 103 FM disciplined him following a raft of complaints and he left the station in June, with the Key 103 FM saying: "Despite numerous warnings and a history of run-ins with the regulators, recent broadcasts have left us with an unfortunate situation where we have had to part company".
Previously, the Broadcasting Standards Commission, which was superceded by Ofcom, ruled that Stannage had been anti-Semitic during a show broadcast in June 2002.
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