I would likely find some books from the library about boys and girls. Something simple and not too detailed but enough to satisfy their curiosity. I wouldn't be concerns about the younger 2 doing this...they are curious and comparing etc. But with the 7yr old possible making them do it I would keep tabs on things. At 7 it still may very well be that they are trying to figure out the whole boy/girl thing. But, if he is making the others do it or goes beyond what he did today then I would start t ensure he remains supervised and that he has some pretty frank and serious conversations about what is and isn't acceptable (without the younger kids present).

Definitely talk the 7yr olds parents let them know they need to talk to him about what is acceptable and about the fact he has no right to make others show them their privates.

I would just comment in passing to the 3yr olds parents what you saw, how you handled it and that you'd let them know if anything else comes up. Try not to scare them lol.

I do think some books would be helpful and I would suggest that the 7yr olds parents take this time to teach him about the differences between boys and girls so he is informed and isn't resorting to cornering little kids to see for himself.