She is now 7, and she doesn't do it at all. I imagine she was just curious about her body when she was 5, because that's way to young. Using the same open method, talk to your kid and let her know what is and isn't appropriate so that she can unlearn some of the stuff she learned. Teach her to respect her body and that it belongs to her and only her.

However, learning a bit more about special education law will probably help you out. Look for information online about the Individuals with Disabilities Education Act (IDEA) and Section 504. One thing that may make you feel better is to understand that under IDEA/Section 504, a child with epilepsy must be provided with provisions to help him or her succeed in school, in the "least restrictive environment." Even for most children that actually have epilepsy, this will usually not consist of a self contained classroom, but may include some extra help or attention. Obviously if this child has been functioning fine in normal classrooms up to this point, the school will not pull him/her out of regular classes just because of this false diagnosis. My guess would be that most schools would just include extra support in case he or she needs it. Thus, just because a child is "in special education" or has an IEP, it does not mean that the child will be isolated or pulled from regular classes.

The only time that any child is not mainstreamed is when he or she cannot learn in a regular classroom. Thus, if this child truly has no disability, it would be unlikely (and against IDEA, as well as unethical) for the school to place the child in a separate classroom, even with a false diagnosis. So, if this is your fear, it seems very unlikely. Either way, if you are the other parent or have some rights to this child, it may be beneficial to try and attend the IEP meeting so you can have some input and better understand what the plan is.

To learn what provisions are made for children diagnosed with epilepsy: http://www.epilepsy.com/info/family_kids_education