When a child asks, that's when they are old enough to learn about sex. For my daughter, that was about 5 or 6. I rationed out the answers at first, only giving her very basic info. I didn't dumb it down or call genitals baby names. Now that she is 8 she is sophisticated enough to know more of the details, again, she has asked.
I do not hide my period from her, she knows she will experience that in about 5 years.
I also am ok with being naked around her, it feels very natural and she has developed a very healthy attitude about her body. She can't wait until she has curves someday!
Here is a good post I wrote about kids and sexuality:
Pedophilia - the Funny Bone of Sexuality » The Beautiful Kind