Don't allow your spouse to normalize his sons behavior.  Protect yourself and your children, because should this go to the authorities you can lose your children as well.  Take this seriously and don't allow DH to downplay it.  His son needs serious help but I'm not sure it will stop him being a predator! 

Leave and protect your children. If you don't they will never forgive you. 

Your first duty is to protect your bio children...no matter what.

I must assume that your ex was told, correct?

Your ex may decide to file for custody if HE thinks you are not protecting her.

LETS say this boy was a kid in school. How do you think the school would have reacted....blow it off,??? I do not believe so.

Normal to be curious? Yes. Normal to touch your stepsister when she's sleeping? No. Normal to do it a second time with someone else? No. 
 

Of course your husband wants to have a relationship with his son. But minimizing his behavior is dangerous. If it was a girl at school he'd be arrested and expelled. 

my husband says he's a kid and its normal to be curious.

Four year olds are curious. Your SS is 14 years old and snuck into your daughter's room to fondle her. He knew exactly what he was doing.

I have no advice on how you cannot let this come between you, especially as he is not taking it seriously. Makes me wonder if it's happened before and your husband brushed it off so his son thinks it's okay to keep doing it.

Had this happened before you married him, would you still have married him?

Are you seriously asking about this?  

You file charges against your SS, leave your DH, and get your daughter any help she needs.

Why in hell would you want to stay with a man who minimizes sexual assault?

So if he touched your 5 year old, would he have been curious as well? How do we know he hasn't touched her? 

I get being curious, but this goes too far especially with your DH's response. I would do anything to protect my kids from him. I would never allow them in the same room. 

When you say "all the steps were taken," does that include calling the police?  Putting the SS into an intensive counseling program?  Or was it just shipping him off to grandma?

That boy would never be in the same house as my kids again.  I'd leave my marriage before I risked having my kids exposed to that junior predator, especially since his father is trying to normalize his behavior.  It is anything but normal.  And to answer your question, I don't know how you can not grow apart from a man who is defending and enabling a budding sexual predator.  In your shoes, I don't think my marriage would survive the way your husband has responded to this.

You as a mother you need to protect your child! Call the police!!! It doesn't matter if he's 14. He knows better! It also doesnt matter that it's your DH son. Expose this behavior right now! The worst thing you and DH could do is to "protect" him and not report this. Absolutely not. If no legal action is taken, this most likely will happen again and to someone else's child. When my brother was 5, he was molested by his friends 13 year old brother at a sleep over. I take this kind of thing very seriously. Your SS needs help. And if your DH is making excuses for this behavior, DH needs help too. Your babies come first. Do everything you can to for your daughter so that in the future she knows you will do and did everything in your power to protect her. 

How does your daughter feel about you spending any amount of time with the boy who sexually assaulter her? I would think she would feel some sense of betrayal. Quit worrying about growing apart from your husband and start having some concern for your daughter.

What was the response from the parents of your daughter's friend?

Your daughter should never have to be around this kid again and it's your job to protect her. His behavior is not normal in any way and he should have been placed somewhere to get treatment.

What he did was predatory and it will happen again if given the chance. 

How do you prevent your marriage from falling apart? You don't. The ball is in HIS court, and he can't dribble his way out of a wet paper bag it seems.

Your #1 responsibility is to protect your children, and that includes at the expense of your marriage. If your husband won't protect your kids by getting his son out of the home and into treatment, at a MINIMUM, then he has failed your marriage.

And if you don't physically distance your children from his son permanently, you fail as a mother. Point blank. It's entirely unfair for your daughter to be exposed to someone who took advantage of her to keep a husband. If that is a price you think she should willingly pay, you need to hand both kids to their father(s) and cease being their mother.

I'm sorry you're in a position where you lose when you did nothing wrong. However, that's the situation you're in. 

Looks like a hit and run to me.