WalkingInThePark, I think you did the right thing by maintaining self control and defusing the situation. Children are sexual, and I think they can be seductive. Whether or not they know what they're doing probably depends on age and experience. Who knows, maybe even some younger children have had experiences or seen things?

In any case, even if they are overtly coming on to you, I think the safest course of action is what you did. Say "no," and defuse the situation. It keeps you out of prison and prevents a potentially huge hassle for the child, as well. (Even if the child wanted it and liked it, if other people became aware of what happened, how they reacted to it, treated the child, and ran her through a gauntlet of therapists would most likely not be good for her.)

If a girl got seductive with me, I'd feel flattered and love her for it. But I would say "no," explain that it's not a good idea, but continue being her friend.