Sam has discovered his penis.

Yep.
And by discovered I mean in the latched onto sense. As soon as the diaper comes off he clamps on.
This is seeming to bug Kate, though she's getting used to it. She has two brothers, not to mention a husband, so I'm not certain exactly what it is about Sam's behavior she's finding objectionable (or at least unusual).
Note: Kate just read this and vociferously denies any objection to this behavior. She's very glad that she's discovering his body and wants credit for teaching him the word penis.
Our new night time ritual goes as follows (I'm usually cooking dinner when this happens, but sometimes I get to listen in by Sam's door)
Kate: Sam, where's your belly button?
brief pause
Kate: No, that's your penis. Where's your toes?
brief pause
Kate: No, that's your penis.

If I'm able to at this point, I jump in to the conversation...
Mark: Sam, where's your unit?
brief pause
Mark: Good job Bubba. Where's your willy?
brief pause
Mark: Good job Bubba.
(Sam's primary nickname is Bubba. His secondary nickname is The Ginger Midget, thanks to Uncle Brian and Aunt Theresa. I usually abbreviate it in writing to tGM).

So, one major developmental hurdle overcome. The boy is playing with himself. You have to be able to play with yourself before you can play with others, right?