We discourage all of this and separate the boys whenever we see behavior we don't like (sending the other boy home and our son to his room after one warning). We are tempted to never let them play together, but we also feel it's important to teach our son not only what is right, but how to do the right thing when we aren't there to supervise him. I also don't want to alienate the boy and his mother (no father in the picture). If we don't deal with this issue now, we'll have to deal with it as the boys get older, when the undesirable behavior could be a lot more damaging or dangerous.
Part of the problem is that I'm not entirely sure what is normal behavior, developmentally, for a 4-year-old with regard to bathroom humor, curiosity about bodies, and lying. Are we overreacting?
Thanks for your any advice you can give us.
I think you should have a non-judgmental chat with the other mother and express your concerns. I also think that these boys should have someone look in on them frequently when they do play together. It is not too young an age for your boy to begin to internalize that "We tell the truth to each other in this family." The amount of time the boys spend peeing in the yard, pulling their pants down in the closet, etc. should not comprise a majority of their play time. I would also be aware that these body explorations could begin to arouse some sexual feelings in your son that he is not well prepared to handle. I don't say this to frighten you, merely to make you aware of their possible occurrence. I would also attempt to broaden your son's social contacts so he is not as dependent upon this boy for his fun.