Too many questions unanswered.
Was there a non-nude beach available for the mom to take her kids? If so, it's the mom's fault for not taking her kids somewhere appropriate. If there wasn't a non-nude beach, the mom should've either found a spot fairly devoid of nudity, or the woman being investigated should've been courteous enough to cover up, if the mom had no place else she could go.
Noel, the human body's beauty isn't the issue. The issue is that minors should not be exposed (pun intended) to adult things. If this had been a man rubbing sunscreen 'sensually' on his penis, would it be 'beautiful and natural'? No. It would've been gross and inappropriate. It's not appropriate for a twelve-year-old to watch a grown woman rubbing oil on her tits. There should not be a sexual exchange between a minor and an adult, physical contact or otherwise.
What children see or don't see should be something controlled by their parents, and their parents alone. Period. 'Net nanny programs are there for a reason, as are ESRB and MPAA ratings and all those other things to ensure parents can keep their kids from being exposed to inappropriate things.
The question is - was this situation something that was taken out of the mom's control? If no, then it's her own fault (just like if she was stupid enough to let the kids online unsupervised where they looked up porn). If yes, then the sunbathing woman should have respected the mom's wishes.