Do I have a WHAT??!!

Last night as I was getting Thomas ready to take a bath, he comes out with this question that I was TOTALLY unprepared for! Now I kept telling myself "He's just turned 3 1/2 he's too young to know these things. or is he? "Is he? Ugh! I guess it was gonna come up sometime! Anyway, I'm undressing him, {or helping him anyway as he likes to be Mr. Independent lately}, He comes out of nowhere and says "Do you have a pee-pee?" I stammered and was like "what?"
he repeated " Do you have a pee-pee?" So I maturely and calmly said " no honey I don't". And before I could ask where he learned that, he says " Am I a boy?" I said "yes, yes you are".and he said "And you a girl" and I said "Right,yes I am." and he said "And daddy a Boy?" I said "yes, daddy's a boy too, just like you.' he says " And Daddy has a pee- pee just like me!" " I said "that's right"All the while I was trying to figure out how he had learned this on his own! I'm sure Playhouse Disney doesn't have a sex ed program that I'm aware of! When I told Tom about what he said, he didn't help- all he said was"that's my boy!" This ain't "married with children"here! oh boy and the obsession of getting him to stop playing with it is impossible.I'd throw in the towel but I'm too stubborn. I make him sleep with underwear on so he can't get that much access to it.ESPESCIALLY if he sleeps over someones house.anyway, What happened to my little boy! we're not supposed to be talking about pee-pee's yet! he's too innocent! All I keep thinking of is that movie Kindergarten Cop with Arnold Schwarzenegger with the one kid that says " boys have a penis and girls have a vagina"- I can just see my son doing that in preschool! I know I need to tell him at this age and which I have already done-{whether he remembers is another story} is appropriate touching and what is and not and if he ever feels uncomfortable about something that he can always tell mommy or daddy. But the whole sex and gender thing for some reason just totally threw me- I was just like No! No! NO! he's too little ! I want my little boy baaaack! Am I overreacting?
Probably am-He's just growing up soo fast! Where does the time go??