He didn't get turned on by a toddler I think he felt good of the thought that he was the Dad's wife/partner because he was in love with the dad not the kid.
He clearly got a stiffy after the kid called him “Mom”, regardless of him being in love with the dad, that is very inappropriate behavior. Why would he bring the kid into it at all?
This was actually so weird why are you getting turned on by a toddler?