You handled it fine - i.e., labeled it as wrong and set a frim limit around it. Now, I would try once again to learn how the five year old might have come up with this idea, since it doesn't normally occur to children of this age. It may well be that he has no memory of how he did get the notion - five year olds are not famous for long memories. But it's worth a try.
I too would try to find out how he got the idea. Is there a chance that he was exposed to this by a family member?
They will remember these events all their lives . This kind of stuff has that ability to haunt us with guilt, with later confusion on sexual matters, identity's etc.. It needs cleaning, it needs to be addressed as this adult person (if it is a person) needs to be stopped from damaging more kids. Do they have tv in their room?
This information came from somewhere, did they watch it from porn from somewhere? Tv is porn these days, but that behaviour must have been copied from someone doing it to them or seeing it from somewhere. Keep pressing, get good sex ed books. They have gone this far, it needs further addressing, so they are not left like caught bad 'dirty' kids caught caught caught, -that is how they feel.
woofytoyou