Here you can "talk shit about" which has the meaning you use (e.g. "I was just talking shit about my colleagues"), whereas just "he's talking shit" is similar to bullshit, except maybe a little less angry and more dismissive.
Yes, that's the same thing I was referring to. Talking shit (with no modifier) is, in my experience, an uncommon phrase to use in a sentence; the only time I can recall hearing it is when person1 is telling person2 that person3 was talking shit about them. In that situation, the "about you" part is implied, and you can leave it off. "Don't worry about it man, he's just talking shit." That implies person1 is saying person3 said something negative about person2.
Now, what I would be doing in a bar is "shooting the shit". This means you're just telling bullshit stories (wild, made up, inaccurate, designed purely for entertainment). I caught a 30" bluegill is bullshit, and I would only say that when I'm in a bar shooting the shit.
Language is a wonderful, complex, irritating thing. The same words in the same language meaning two different, completely context-sensitive things. The same word being used in completely different ways. Not being able to describe the use of a word without long, protracted arguments giving multiple examples of the usage. Even in the same county, the same language is used differently based on geographical region.
It amuses me to hear a US citizen use words and pronunciations I know are from the UK, just due to exposure to the BBC. In the US, Hyundai is pronounced "hun-die" or "hun-day", but I have a coworker who is very much an American who pronounces it "high-un-die" because the only time he hears the word is when watching Top Gear.
The Internet makes it difficult to tell which dialect the author is speaking, spawning these arguments and fostering communication between people 3000mi away from each other. That's a wonderful thing. Now if only I could figure out what a curry is and why everyone seems to love it over there.
I'm actually pretty surprised about the curry thing. Here in the UK we get so much US media (films and TV) that I feel like I have a fairly good grasp of what they have in America. Not having curry has shocked me though.
Do they not have curry or just not call it curry? Admittedly I don't think I'm ever eaten anything like that when in America, but never really thought about it..
I think this chain just points out that fact that "shit" can be used in many contexts. Still doesn't answer the fact that the way the author used it is ambiguous.