I don't think they're seeing it as a sexual thing--like others have said, they're curious about other males, especially if their dad isn't around at home.
It would be best if you just downplayed it, but if you mentioned it to their mom, do it in a way that doesn't make either you or them seem like anything is wrong with what they've done. The worst thing would be if their mom freaked out and scolded them. There's no telling what could come from an episode like that. It sounds like you could really benefit them by being a close uncle.
When my nephew was a little kid--like age 5 or 6--he'd look at me at the urinal and piss trough when I'd take him to ball games and such. One time he made a comment about me having a big penis. I didn't make a big deal out of it--just said that I was an adult, and diverted his attention saying that he needed to finish up and wash his hands so we could get back to our seats.
When he was 15 or 16, he asked me if I remembered him saying that. I did remember, but pretended not to. At that time, he said was that he knew what I meant about being an adult. Every summer our family would go on trips, almost all of them had whitewater rafting, canoeing or something where we'd be getting wet and needing to shower and change clothes. He saw me naked lots of times and I saw him and my brother-in-law naked, too. We all knew when he'd caught up and showed that he took after my side of the family.
I'm not that much older than my nephew. We have a real cool uncle/brother type bond which I hope you can have with your nephews.