I would have put his underwear into a bag and handed them to the parent and explained that there was a little bit of a messy situation today. I would have explained to the little boy that his Mom wouldn't be mad at him, it was an accident and calmed him down. But I would NOT have washed the underwear or played his little game.

Your contract is with the parents and you care for the little child. Your contract is not with the child and we don't like it when parents don't 'parent' their own child, so don't let yourself fall into any of those games as the HDCP. This is just a little example but you might run into bigger things so it's just a lesson to learn.