Can they touch each other? Hug? Are they allowed to expose their legs, arms, etc., in front of each other? Can they swim together? Dance together?
If I recall correctly, Yichud is okay short-term, but not preferable long-term.
Here's the Rambam (Laws of Prohibitions on Relations Ch. 21), I don't know what the other opinions are.
כא,ו המחבק אחת מן העריות שאין ליבו של אדם נוקפו עליהן, או שנישק אחת מהן--כגון אחותו הגדולה, ואחות אימו, וכיוצא בהן--אף על פי שאין שם תאווה ולא הנאה כלל, הרי זה מגונה ביותר. ודבר זה אסור הוא, ומעשה טיפשים הוא--שאין קרבין לערווה כלל, בין גדולה בין קטנה: חוץ מהאם לבנה, והאב לבתו.
One who hugs or kisses a relative for whom there's no attraction -- such as his adult sister, or his mother's sister, and the like -- while there is no lust or pleasure at all, this is exceedingly distasteful. And this is prohibited, and the act of fools -- as we do not get close to prohibited relations at all, whether child or adult, other than a mother to her son or a father to his daughter.
So the first point here is that this is about grown-ups. For four-year-olds, well ask a child psychologist how much exposure is healthy, I guess.
So affectionate touching between adult siblings is not recommended. (Though I recall reading of a Baalat Teshuva who came from a non-observant, very-huggy family who was allowed to hug her brother at his wedding, as it's only "distasteful", not prohibited like hugging someone else's spouse.) Similarly Rabbi Moshe Feinstein wrote that if a rabbi sees people kissing other people's spouses (something downright prohibited), he should absolutely correct them. If he sees people kissing their grown siblings of opposite gender (or aunts/uncles), which is merely frowned-upon, it's the rabbi's call whether to say something.
As far as how clothed they need to be in front of one another (which is basically the question of mixed swimming), I'd think just applying common-sense boundaries would be appropriate. Not sure exactly where to draw those lines.
As for dancing, if dancing = hugging, then we'd apply the above Rambam (distasteful and strongly not recommended). If dancing is less than hugging, then I guess it's some common-sense boundary question. Rabbi Yehuda Herzl Henkin has some sources that according to some, social dancing was prohibited "as it might lead to affectionate touching", not that it itself was. (And of course there's dancing, and then there's dancing ...)