I am a diplomatic kind of guy. But nudity, especially in a locker room/shower situation, is so very natural. Natural to (some of) us, and natural to the environment. Most kids see their dad's wang, so seeing another one, in the locker room/shower environment, wouldn't be that big a deal. People can be so defensive about men and their dicks sometimes. Yes we like to use them, and often; however, that doesn't mean we want to use them 100% of the time on 100% of people (or animals, minerals, or vegetables).
I think I would've liked to have said "Fuck off!" and went about my business. In reality, because of my diplomatic nature and the presence of the kids, I might have tried to tell him to fuck off when the young ones weren't immediately present.