I hope you aren't letting your son be with them alone anymore!
Just as you did not appreciate your sister communicating via your mother, refrain from that yourself - it's not helpful. If you have anything to say to your sister, tell her directly. Now, to the point about the behavior: no, it is not normal child play. Left to their own devices, children do not think of simulating sexual acts. This sort of activity must be learned in some fashion. Don't assume, though, that your nephew viewed his mother and father engaged in sexual behavior. That could have happened, but it is not the only way your nephew could have learned about the beahvior. There is nothin you can do about the situation with the school. If your sister has specific information implicating someone at school, it is up to her to address it. In that sense, the school was correct in the stance they adopted with you. To your sister's credit, she acknowledged that your son did indeed learn about the behavior from her son. It shows some maturity on her part to recognize and accept this fact. You may have done all you can realistically do about this.