I'd have no more babysitting with that boy. Whoever was watching them, wasn't keeping a close eye on them either.

I'm not sure if an 8 year old can get erect. I think I'd call my pediatrician and ask what to do.

I wouldn't make an issue out of it for fear it would further reinforce trauma in my daughter. Maybe she will just forget about it.

I'm not sure about continuing to live with your roommate and his son.

I think I'd get myself and my daughter out of that situation immediately.