If your initial reaction was simply that you see a beautiful naked woman, I don't believe something is wrong with that. Instincts are instincts, they come first, then the human morals kicks in. For instance, I find myself doing this, and have quite a time watching other men do this, when checking out a somewhat revealing lady. I can't seem to stop myself when I'm not focusing, then I keep myself in check and turn away and silently scold myself. Have you ever purposely tried waiting for a pretty girl to pass by, to specifically look at the reactions of other guys automatically check her out? Pretty amusing, but it can't be helped, it just comes naturally.
However, if the morals didn't kick in, then we may have a problem in our hands. You didn't specify, what your thoughts were after this initial moment, that may be key to deciding if its going to be a problem for you.
On a side note, don't let anybody who insults you for this on this forum or anywhere else get to you. It isn't any of us to judge incest is "wrong". That is a whole other debate right there, since it can differ within each society or culture. I myself personally think it is disgusting, but that just means I've fallen into societal standards, not that I'm right for thinking that way. There are current existing cultures out there that still condone incest, so do not judge nor question a tradition that has been long existent before before yourselves. Perhaps she did this intentionally, perhaps not, based on his story, we know neither.
A beautiful woman is a beautiful woman, regardless of who she is.
To the people who posted before me, I believe many of you said things without further investigating the story, and made many assumptions.
For instance, I don't believe he ever stated that his sister walked out naked in front of him, he only stated that he saw her naked as he walked back into the room. Another possible explanation for why she was out of the room naked in the first place, is that she left all her clothes out and thought he wasn't around and decided to chance running out. Numerous possibilities could have explained her actions, he was not specific enough to suggest that these possibilities couldn't have occurred.
P.S. In an attempt to make things a little less tensive, I was going to say if you can give me her number, but then I didn't know how you'd respond to that. =P