His butt is different than his penis. Not much different but different. That's just my opinion and kids say and do weird things. Is this indicative of abuse of the child? Not necessarily. Was this done in an overtly sexual way or goofy kid way trying to be funny?
With that said, I'd not let my child go there either unsupervised.
Children are naturally curious. He could have been making a crude joke. He could have just been acting like a curious 4 year old. What raised red flags for me personally was your extreme shaming and zealot-like reaction. Did this trigger past memories within you? You may have some repression from your own childhood that has been triggered. It would be best if you sought out some professional opinions.
You are seriously overreacting to something that IS completely normal for children. The fact that you are "disgusted" by this, seems to be a much bigger issue than what actually occurred. Why are you "disgusted". It seems that somewhere someone told you something that made you believe that the buttocks are disgusting, or the body is disgusting. The other mother was right. Now, it is our job as parents to "guide" their behavior. Someone could tell the child that they should not take their pants down in front of other people. But, the child should not be shamed, or made to feel bad about the behavior.
My boys do that to be silly sometimes. They are 4 & 6. I remind them that private parts are not something we joke about and they get a serious talking to if they do it. But they equate it with butt/fart/poop/toilet humor in their minds. Boys and girls are totally different.
Society has become so obsessed with Stranger Danger and sex and abduction it is harming children. Fact is the FBI has stopped supporting the idea of stranger danger because it sends the wrong message. 97 % of all molesting and abduction is done by the family or friends of the family. But mother obsess over their children going to the bathroom at stores etc., react by either taking them into the woman's bathroom or constantly franticly calling are you OK. Why is it that molesting and abductions are on the rise not going down? It is because there no longer is respect for others, because Stranger Danger causes the breakdown of society, to be social. Read Sex Without Shame by ALAYNE YATES, M.D.
This is completely normal behavior for unsupervised children. Used to be called playing doctor.