The right way to get formatted node's body field in Drupal 7
The API has the field_view_value() function which essentially does the same thing as your code, except it applies all of the field/instance settings to the value so you won't need to make changes to your code if you change a field setting.

You can use it like this:

$field = field_get_items('node', $node, 'body');

$body = '';
if (isset($field[0]['value'])) {
  $body = field_view_value('node', $node, 'body', $field[0]);
}


Just in case you want the default HTML wrappers included with the field output, you can use field_view_field() instead.