I just got off the phone with the Principal. She told me she spoke to the two boys and my daughter all separately yesterday. She spoke to N and she asked him, if he said anything wrong regarding my daughter on the bus. She said she didn't quote and say "did you say you want to have sex"? She said by cornering him with the actual statement -he might deny it out of embarrassment -I agree with her. So she said N hung his head down low and said "yes I did say something inappropriate about my daughter". So now I know this is true. She warned him to never say inappropriate things again, otherwise she would take action. The principle hopes he understands, to be careful what he says from now on and to tell her if this happens again. I really like this Principle and she's very easy to talk too. We spoke for 20 minutes and I feel very satisfied with how she handled it.
This boy is only 8 and he has an older brother in grade 5. I suspect he might not even know what "sex" means, so I'm not going to get too upset. If this was in grade 6 and up I would know, they truly understand what sex means. Hopefully N now realizes, that you just can't say inappropriate things and get away with it. I hope this is the end to this and if not I will keep going until it stops lol. Right now I feel satisfied how it turned out.
I also asked the principle, when does the board of education teach sex ed. She said in grade 7. I think it should be taught in grade 5/6. I have already spoken to my oldest(12 yr old) 2 years ago. I believe in educating her about sex, but also support making the proper choices. I told her I'm an open book and she can talked to me about anything. It's a scary time right now with kids as young as grade 5 having sex. Thanks to everyone who responded to this thread.

I feel very satisfied and happy how this turned out.