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I agree with the other letter writers who said that 1) these are probably Unitarians we're talking about, and 2) the teacher with the poor boundaries may well have a personality disorder. Whereas people in a more conservative sort of church might not hesitate to shut down someone whose behavior is deemed inappropriate, many Unitarian Universalists tend to be more wary about judging the behavior of others--particularly that of fellow Unitarians.
I grew up in the Unitarian church. The *primary* reason I have no desire to attend as an adult is that as a child I was repeatedly subject/witness to inappropriate behavior by adults that was observed by other adults who failed to intervene. I felt unsafe and violated. Kids need and like boundaries (even as they test them). A sex education course for children shouldn't be pornographic. Those kids are a captive audience for her inappropriate behavior. LW, do whatever you must to stop her. You will have to supply the boundaries for her. If she gets nasty when confronted and subsequently disrupts the class, relieve her of her teaching duties. I urge you to forget about tiptoeing around her in an effort to preserve "religious community." The kids are more important than her right to exhibitionism.