To add to other posted, I'd take a picture of your son's arm and also take him to the doctor. If it still hurts, she may have also hurt his elbow or shoulder socket (easy to do i little ones). They often don't complain to the level of the injury. I would trust your son's answer more than the other mothers. I would definitely contact the mother and ask her how the night went. Then say your ds wanted to come home....
A good book that might have some helpful info is Gavin DeBecker's Protecting the Gift. It's all about how to *really* keep your kids safe, how to trust your intincts and theirs and how to stand up for and protect them. It might not have the exact scenario in it, but i'm sure it will give you much strength in this and many other situations. HIGHLY RECOMMENDED to every parent. Also, reinforce to your son that he did nothing wrong and he should always tell you everything and that you won't be mad. Thank him for telling you and tell him how proud of him you are. It might be a great teaching tool for you to inform him that no adult or child has the right to harm him or make him uncomfortable in any way.
TRUST TRUST TRUST yourself!! If you don't think your son should even be friends with this other boy, regardless of where they play, stick with it. He may be confused if you say they can't go to the other's house, but the boy can be at your house. Maybe he has issues with the boy too. I wonder in situations like these, if the apple doesn't fall far from the tree. The boy may have learned and is acting out abusive behaviors too.
Regardless of what the mom says, someone - some adult - has done something to him they shouldnt' have.
Good luck! Hugs to your son and you.