Curious 7 Year Old Daughter ???

If it were me, I would sit her down and tell her one more time that she is NOT EVER to show anyone her privates, ask anyone to touch them, smell them, and that she is never to touch anyone else's. Say this in a very stern, serious voice. Then the next time you give your son a bath, or change his diaper remind him that his "pee-pee" is his, and that nobody else besides mommy, daddy or the doctor is to touch it.

Also, each time you see your daughter with her hands under the blanket and you're sure she's tickling herself remind her that she needs to go in her room or the bathroom when she's doing that. And remind her to wash her hands when she's finished.

This is probably just a phase, although it seems long.

I agree with SweetChaos completely. Reiterate that she must do her "tickling" in private. I would also ask her about having someone smell her bottom. Did someone teach her that or did she come up with it on her own? I would have to know that answer and get to the bottom of it. You have done great with not freaking out and shaming her about it!
Good luck!

She needs to get some serious discipline for trying to get her brother to smell her butt - as in told that it is disgusting, it is unacceptable, and there will be consequences if it ever happens again. I think it's probably just kids being gross and into "potty humor" but she needs a reminder that this falls under the "privates being kept private" rule.

As for her "tickling" herself, yes, it needs to be done in private, in her room, if she feels the need. And her hands need to be washed after. No need to freak out about it. But I would also make sure she isn't actually itchy "down there" for some reason (yeast infection, etc.).

Um, I don't see anything unusual in these actions, actually. Children explore their bodies and masterbate from babyhood on. I had siblings close in age and we "played doctor" at times just because we were curious about our own and each other's bodies. I agree that asking her to touch herself in private is a fine response, as long as it isn't presented as she's doing something "bad", just private. I really don't know what is "very disturbing" about what you saw them doing together. I think it is normal childhood curiousity. Nothing wrong with telling her to stop doing that, but really, it's no big deal. They are kids.

I chuckled when you talked about the "smell my butt" comment. My grandchildren are 8 and 11 and they still tell that "joke." It's a part of potty humor that is normal for children. They do outgrow it. In the meantime we ignore them. At this age they're doing it for attention.

This all sounds very normal and nothing to be concerned about. Children are curious. You can tell them you don't like the smell my butt comments and separate them each time it happens. Putting a stop to it is within your rights. Just know it's normal and not worth a whole lot of energy on your part.