Because they're from Bostin
It's spelled basterd because they're from Bostin and that's how they spell it there — or rather, how they pronounce it.
Unfilmed flashback
According to an article on Cracked.com, "6 Crucial Movie Scenes That Never Made It Out of the Script", this was explained in a scene that was scripted but never filmed.
It was a flashback to Boston, spelled "Bostin" in the script, where Donny buys a baseball bat and then goes around his Jewish neighbourhood, asking people if they have any loved ones in Europe they're concerned for and if they want to sign the bat for them.
INT - SPORTING GOODS STORE- DAY
MR.GOOROWITZ'S sporting goods shop in Donny's Jewish Bostin
neighbourhood. Donny walks in.
MR.GOOROWITZ
Hello Donny, how are you?
DONNY
Ah, just dandy, Mr.Goorowitz.
MR.GOOROWITZ
Your mother, your father - everything
good there?
DONNY
There just fine. I'm shippin off next
week.
The store proprietor, extends his hand to the young man.
MR.GOOROWITZ
Good for you son. Kill one of those
Nazi basterds for me, will ya?
DONNY
That's the idea, Mr.Goorowitz.
MR.GOOROWITZ
What can I do you for, Donny?
DONNY
I need a baseball bat.
He goes to a mrs. Himmelstein, who is about to sign it "Madeleine".
MRS.HIMMELSTEIN
You must be a real BASTERD, Donny?DONNY
You bet your sweet ass I am.
MRS.HIMMELSTEIN
Good. A Basterds work is never done.
Specially in Germany.
We then see Donny beating Werner to death with that same bat.