I wouldn't make a big deal over it. Just say it isn't appropriate, that our privates are private and that's why they are given that name. Good time to introduce more (cause I imagine it's already been broached in some way) appropriate / inappropriate exchanges. Maybe start using "That's appropriate" "That's not appropriate" when kissing goodnight, hugging before leaving him at friends house, kissing him goodbye, bathing, dressing, tickling, etc.
Youngest cub was a ham about his penis and thought it was the greatest thing ever. Not sure too many men vary from that.
Again, probably not a big deal.
I am with Squinney.
I would add "those are your private parts."
"Those are his/hers private parts, we do not touch other people's private parts." (For boob pushing type stuff, or if you find him overstepping touch limits with another kid etc.)
I think it is the calm attitude and the general attitude to sex/adult touching that gets picked up, I don't see a need to do the "When you get to be grown up...." thing at this point.
"Where do I Come From" is a nice book for when you do go there, btw, if he hasn't already seen it. It does the grown up stuff really nicely.
Keep it clear and simple.
The fact that you don't have a fit and such when he asks you to jellyfish with him, is what gives the message about touch not being bad. You are simply letting him know the limits of his sexual behaviour right now, as you do other behaviour.
If he asks more, and the trick is always to let him know that it is absolutely fine TO ask more, then give him the info he asks for, no more at this stage.
He knows what he wants to know, and what he is ready for.
PS: I only had a quick read of what he is doing, and I will go back and look properly when I get home, but it sounded developmentally normal, and the affect also sounded fine (ie happy, giggly.)
If you think the emotional tone was a little off, tell me more about it.
Heehee.....my new job is therapy for kids with sexualised behaviour, so I am having a crash course in normal vs concerning sexual behaviour in little kids.
I am up to my eyebrows in bums and willies and rudy bits (I HATE parents calling them that!) and boy chests vs girl chests and 'ginas and meenies and the whole odd vocab of kids and private bits.