Thanks for bringing your question to JustAnswer.
I'm sorry to hear the child lives in a very rural area, because it's imperative that she be evaluated by a professional with experience in childhood sexual abuse. Not always, but many times, when a child this young is exhibiting such sophisticated sexual behavior for her age, that someone has taught her this through sexually abusing her.
It's very important not to interrogate the child about this...it can make a scared child decide to never tell. Get her to an experienced child therapist first.
In the meantime, she needs to be monitored at all times when other children are around her. Her behavior can traumatize the other child, so it is for both their protection. Mom should also closely monitor her television exposure, and restrict her to children's shows for the time being.
I know this must be painful to read, but I have background in working with children who were sexually abused, and often the first indication is when they start precocious sexual behavior with others. Advise her mother to keep this child close to her until she sees a therapist. I have worked with children who were abused by a person no one would ever dream of suspecting...teachers, babysitters, Sunday school instructors, uncles, older cousins,etc.
What else, don't punish the child. Firmly explain that the behavior is unacceptable, but try to do it in a way that doesn't shame the child. Children act out what they have seen or been taught. She also needs to be told about good touch and bad touch mailto***@******.*** for her own safety--and it will help her understand why she shouldn't touch others.
Here is a therapist directory that may help you find someone close to her area. This really is an issue that requires professional assessment. http://therapists.psychologytoday.com/rms/prof_search.php