I think I know where Praecepta is coming from, that the disclosure by your son of what he told his baby sister, might bring risk to him and to the family.
The thing is your son is tortured by this incident. He is horrified by it. He has to be helped to forgive himself, to understand that nothing happened. He did nothing to her. That he is a child who was criminally sexually assaulted.
If you fear that there is more that may have happened that he has not yet disclosed, this too has to be faced. Because for the welfare of your son and your daughter, whatever did or did not happen has to be exposed and dealt with, for the well-being and the safety of them both.
That is why I believe it is in your son's and your best interest to rapidly go to the police and reveal all. Because it is clear your son was the victim in this. And to tell the whole truth about what the thing with his sister in context. To tell minimizes the risk, it does not amplify it.
What son was doing with his sister was symbolic. He was attempting to repeat the scenario that happened to him, except this time with control, no longer the victim. This is normal in these circumstances. He was trying to come to grips with a trauma that happened to him.
He could not go through with it. He did not. All that happened was verbal. She did not understand. He did not touch her as far as we know. So much about what you tell us about your son, I deeply admire.
I might consult a family law attorney who will understand how to protect your family and the kids. That has been my fear, that CPS might infer there is ongoing risk to your daughter.
That is the reason that I think you should be proactive. Because if your son does go to therapy, everything will be uncovered. Which is a good thing. Everything should be revealed.
But there could be the question, is the baby in risk? This is why I believe it is in his welfare and yours that he be defined as the victim in this case, with others as his perpetrators. Son is not a perpetrator. In this way you can explain that it was son's deep concern about his remark to his sister, that brought him forward to you to take responsibility. All of this on his part, place son in a very good light, with me at least.
I urge you to inquire about free victim's witness/victim of crime benefits through the district attorney of your county. Perhaps you can call the child sex crimes division of your police department and speak anonymously about their process in such a situation.