Again, thanks everyone for offering insights and advice.
However, I do not think anyone knows the situation better than I do.
I am quite sure that abuse can be ruled out in my daughter's situation...sorry to disappoint someone there!
I also want to point out that I remember playing with yourself, spanking the monkey as a child, as early as 2, and I wasn't molested, thus the statement that children do not learn self-gratification on their own does not make much sense to me.
The emotional distress theory does fit with the picture.
In fact, she uses the sexual play as a form of self-soothing, I. e. when I am focusing on something else (mainly work and housework).
I have discontinued the sling b/c no more practical, but my daughter is still carried a lot. We are very close and attached. People around me can't stop warning me that I'll spoil her by carrying her and playing with her that much.
Although I am a very loving and caring mom, I know I'm not perfect and I have myself some emotional issues to deal with. It is quite possible that, at times, she perceived my anxiety about work or everyday adult-life's issues as if other things are more important to me than she is ( which is obviously untrue). I am also sure that going to preschool,( 2 days a week, only 3 hours at a time) caused her some abandonment feelings. We talked about it a lot. I did my best to let her take her time, but again, I'm not perfect.
We have a very honest relationship and I apologize to her every time I think I might have done wrong.
So far, my daughter's behavior has not reached the potential to disturb other parents. I have to say that many other parents of preschoolers I know ( NOT from the same catholic-wicked preschool) have similar problems with their sons/daughters. One mom referred to me that the pediatrician told her sexual play is quite normal at that stage and is part of self-discovery..
Many kids do that privately, and never let the adults know they do that, just as I did, out of fear of being scolded or rejected. Apparently I did not cause her such guilt feelings.
I'll keep on working and educating myself to overcome my personal issues and to become a better parent. Parenting is a learning journey and we all have minor and major pitfalls. Love matters more than zealant political-correctness.