I think your worst fear is your crazy neighbor. He sounds very frightening.
As a victim of child sexual abuse, the acting out may be a sign of something that may have taken place...whether physically or by observation. it is very traumatic to such a young child. i am 46 and it took me 35 yrs to finally deal with it. keep your kid away from the freaks next door. their morals are based on selfishness and self-gratification without regard to others feelings or any repercussions. it's the monent they live for.
little kids will do silly pseudo-sexual things...it's how we try to make sense of things, but when coerced by an adult (who may be as young as a boy who has just reached some semblence of sexual maturity...13, 14, 15, and up) it confuses the natural progression of the growth of the person...one such growth is sexual identity. i was basically emasculated by the abuse i endured...felt guily, insecure, and unsure of how to be in a relationsip. i'm ok now. God/Christ took it all from me when i was 40. yes, Christ. in the blink of an eye! i have forgiven the man, but can't forget. only God can forgive AND forget. He'll deal with the "man" later, i'm sure.
i pray that your son has been rescued in time.
I think your son would benefit from some counselling and especially in light of the neighbor being so angry, if you can try to get a quiet moment with the neighbor and tell him your son is going to be having counselling and that you really believe he was playing inappropiate Games not sexual, and you have dealt with your son over the matter.You do definatly have to curb this behavior in your son it is inappropiate to do what he did even if it had no sexual impact.