My Overly Interested Child/PLEASE HELP

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My son is 5 years old, and he has a problem keeping his hand to him self.  It has been on several occasion that my family and I and caught him either playing with him self.  We have even caught him letting other children around his age touch him.  I try my best to not let him be alone with any other children.  This has stopped for a while, so I thought he grew out of it. Recently there was no school and I had my sister watch him, and she told me that she came in the room right on time to find him and my nephew under the cover.  She did not question them, but I questioned my son when we got home. Of cause he tried his best to lie about it. I had to like drill the truth out of him.  He finely told me that he touch my nephew penis while his underwear was on. I am so in space on this situation. I tried every thing, he can only watch the Disney channel, and nick channel.  Even with the Nick channel Sponge Bob take his pants off and shows his underwear, so I try not to let him watch Sponge Bob. I don’t know what to do, Time out don’t work, yelling don’t work.  My fear is that, I don’t want my son to be a sexual predator, or some child parent to confront me with some that my son did that he should not be doing.  Please help, because I really do not know what to do next.  I am afraid for my son, this type of behavior may be normal at his age, but not every one sees it as that.  PLEASE HELP!!!!!!!!!!!!!