From another site:
Analysis: Clever as all that may be, whoever came up with it doesn't know shit about "shit." According to my dictionary, the word is much older than the 1800s, appearing in its earliest form about 1,000 years ago as the Old English verb scitan. That is confirmed by lexicographer Hugh Rawson in his bawdily edifying book, "Wicked Words" (New York: Crown, 1989), where it is further noted that the expletive is distantly related to words like science, schedule and shield, all of which derive from the Indo-European root skei-, meaning "to cut" or "to split." You get the idea.
For most of its history "shit" was spelled "shite" (and sometimes still is), but the modern, four-letter spelling of the word can be found in texts dating as far back as the mid-1700s. It most certainly did not originate as an acronym used by 19th-century sailors.
Apropos that false premise, Rawson observes that "shit" has long been the subject of naughty wordplay, very often based on made-up acronyms on the order of "Ship High in Transit." For example:
In the Army, officers who did not go to West Point have been known to disparage the military academy as the South Hudson Institute of Technology.... And if an angelic six-year-old asks, "Would you like to have some Sugar Honey Iced Tea?", the safest course is to pretend that you have suddenly gone stone deaf.
Finally, all these stories are reminiscent of another specimen of folk etymology claiming that the F-word (another good, old-fashioned, all-purpose, four-letter expletive) originated as the acronym of "Fornication Under Consent of the King," or, in another variant, "For Unlawful Carnal Knowledge."
Suffice it to say, it's C.R.A.P.