My 4 year old said that a 10 yr old boy next door took her hand and made her rub his private parts, outside his clothes, it was outside while they were playing, Is this something we should be worried about or is it curiosity on the boys part?

This is something that should be talked about with the boys parents.

Talk to his parents. At 10 years old this is beyond the normal realm of exploration that would be normal for your child's age range.

The boy comes to see his dad every other week, he lives with his mum and step-dad in another state and I don't know them! He has 2 younger sisters and he is very quiet around adults but very friendly with the younger kids, mainly boys! Obviously my daughter won't be playing with him again and I am going to talk to his dad tomorrow... is there a chance this boy is being abused? Someone told me that is is repetitive behaviour and someone could be doing it to him! What if it's his dad next door??

Abuse is certainly a possible scenario. But you still have to talk about it with the dad. Don't mention abuse simply tell him that you felt that he should know about the incident and that the boy needs to have inappropriate touching explained and reinforced.

Myself and my husband just went and spoke to the dad and he was very dismissive, saying his son would never do that and my child was probably making up a story! He did not ask where or when it happened, how it happened or anything! I asked if he would speak to his child and he said he would but it would probably be nothing! He is a bit strange, my husband said he didn't seemed surprised by what we told him, just dismissed it straight-away! Have we done enough? Should we tell anyone else or leave it at that?

This is a hard one. That he would say your child was making it up is a defense mechanism. If you are sure your child didn't make it up (and I would tend to doubt a 4 yr old would just make that up) I would be worried about it happening to someone else.

I would try reporting this to your local Family Services agency.