From the National Security Agency Act of 1959 [1]:
Sec. 15. (a) No person may, except with the written permission
of the Director of the National Security Agency, knowingly use the
words 'National Security Agency', the initials 'NSA', the seal of
the National Security Agency, or any colorable imitation of such
words, initials, or seal in connection with any merchandise,
impersonation, solicitation, or commercial activity in a manner
reasonably calculated to convey the impression that such use is
approved, endorsed, or authorized by the National Security Agency.
Up to the Supreme Court whether or not it's in accord with the First Amendment. Either way, using the word 'squash' to describe a cease-and-desist letter strikes me as a bit inflammatory.
Now that I read the quotation more closely, though, I find cause in it to reconsider my original opinion:
> [...] in a manner reasonably calculated to convey the impression that such use is approved, endorsed, or authorized by the National Security Agency.
Frivolous as I find it, I rather strongly doubt that anyone is going to mistake McCall's parody for something 'approved, endorsed, or authorized' by NSA. As such, I doubt the case will get anywhere near the Supreme Court, unless whoever in NSA's legal office is behind the C&D really feels the need to pursue a hopeless cause that far; it seems almost certain that the first court to rule on the matter will do so in McCall's favor.
[1]: http://www.intelligence.senate.gov/nsaact1959.htm