Yes, it is normal for kids to be curious about their genitals and to discover things that feel good “down there”. That’s why many young kids masturbate without regard to who may be watching. Usually they start to understand taboos around behavior by the time they are about 6 or 7.
It’s also normal for bigger kids to experiment with bossing little kids. After all, they are told what to do by bigger people (their parents) so model on that behavior. They are learning what does and doesn’t work in getting others to do what they want them to do. As they mature, most kids learn more sophisticated social skills for getting along with the younger members of the family and for enlisting cooperation.
Although you didn’t say so, I’m guessing that this kind of sexual type play stopped when you were about 7. By then, you had figured out that there was something “wrong” about it. And you didn’t like making your little sister uncomfortable. That speaks to normal development by a normal kid.
What’s most important to me in your letter is that you and your sister have a good relationship now. That tells me that you aren’t interested in using the power of your big sister status to coerce her and that you value your relationship with her.
Since you are 3 years older, it makes sense that you remember vividly what may only be a vague memory for your sister. I don’t think your mutual exploration is going to scar her. But since you are so troubled by the memories, I do think you need to talk frankly with her about it. It is much better for your relationship going forward for you to initiate a conversation than to wait for her to bring it up. If she is thinking about it, waiting is likely to make her think that you are hiding more than she remembers. The whole issue becomes much too big.
I suggest you find a time when things are good between you to tell her that this has been bothering you. Reassure her that what the two of you were doing is not unusual. Apologize for talking her into things she didn’t want to do. Ask her to talk with you about her impressions of your relationship and your sheltered household when you were young. Emphasize that you in no way wanted to hurt her then and still don’t. I hope that what will come out of such a conversation is that you can go forward without the burden of guilt and a deeper understanding between you.
I wish you well.