5 year old boy laughs at friends!

[sibbys]

My first time posting here so a bit nervous...
I have a wonderful 5 y/o boy. He is such a lovely, polite and fun kid - energetic, but not unstoppable. He has started getting really worried about anyone seeing his underwear (like the top of his boxers) and I think it's way too early but then again I know it's a normal part of growing up to be self conscious.. I have spoken to some of the other mum's at school and their kids are also afraid of anyone seeing their underwear. It turns out that they make fun of each other if they can see someones underwear which is heartbreaking. We have spoken to our son about acceptable behaviour towards other people and how it makes other people feel to be laughed at. He seems to understand.... BUT today he was at a friend's house and they asked to see each others private parts (I know it's normal to explore and so on) but he ended up saying that her private parts looked weird and laughed at her! When I ask him why he laughed and said her parts looked weird he said he meant different to his. How on earth do I stop this? We ended up giving him time out and grounding him from play dates the next seven days. His twin sister has played outside with the other kids all day and he has spent the day crying in his room about being grounded! Am I being totally strict!? I just don't want him to think that it is okay to laugh at anyone elses appearance! I know he is small but he is SO wise and understanding on all other subjects and it has just really dissapointed (and embarrassed) us after all the talks we have been through about this exact subject! We have not shouted at him at all but we have shown him our dissapointment and talked calmy (for the 1000th time!) about not laughing or making fun of other people! What on earth do I do?! Just wait for him to get over his private-parts-obsession or something completely different?! He is a good boy (and such a good friend when he doesn't laugh)....

Just to sum up: I am not cross that he wants to see other kid's private parts, but that he would even think to make fun of them or their appearance! I think it's because he is so self conscious himself and it's a way of protecting his own feelings, but still!