J., your son is normal. No doubt, if the daycare center has been around 2+yr olds for any length of time, they have certainly seen this behavior many, many times. This is very normal behavior that takes some time and patience to redirect. Please let your son know that this is how God made his body. And that ALL of his parts are fine and okay. The last thing you want is an older son who thinks his private parts are bad parts.
I struggle with this exact thing myself with our 2 yr old son. In fact, we were at a homeschool used book sale recently, at a local church none the less, when our 7yr old son "drove" him up to us in the stroller. They had been off running around. He loves to push the baby in the stroller and they were having a blast. Our 12yr old son was walking around the room looking (probably at the pretty girls not really the books and things if I had to guess) when we all came together at this one table. I was reading the back of the book set I was thinking of purchasing when I hear the oldest saying,no yelling quitely (ha ha), "THE BABY!!!! LOOK AT THE BABY!!!" I kept reading until it dawned on me that Dad wasn't going to respond. So when I looked down and saw the baby, ALL of his private parts were sitting on top of the waste-band of his shorts. I jumped into action telling him no, that if he had a problem with his privates and needed to check on them that he needed to do so in the bathroom. And as I walked with him to the bathroom it came flooding into my head, "how long was he like that before we noticed it? How many people saw him in all of his glory?" That room seemed to get bigger and bigger as I walked across it with him that night.
Bottom line...you are not alone in this fun world that we call parenting!
Take Care,
N. =) SAHM homeschooling 3 boys 12, 7 & 2 yrs old and married to Mr. Wonderful for almost 15yrs!