I would imagine that they are both just two little kids who were having a bit of a look at one another,out of interest, they are after all only 7 and 8 and I really don't think you should get it all out of proportion too much. If you go on and on about it, ban them from playing etc then they'll just think it's a huge deal. Just have a gentle, non angry word with your little girl and suggest that they don't do it again and explain to her WHY some places on her body are private.all kids do things like this, it's normal, natural and whilst not to be encouraged it certainly shouldn't be made an enormous deal out of , so if possible just relax about it and don't embarass your little girl, I dare say she feels bad enough as it is having been discovered.