I'm not so naive as to think that this kind of thing doesn't happen, I've even had some high school friends confide in me about such things, but it was teenagers. Not that being younger is any excuse, but sometimes younger people do tend to have very poor judgement and a lack of self-control in certain areas. This guy was clearly old enough to know better.
Depending on how old she was at the time, it could be that the cousin is using it as a tool of manipulation over him. Or, another way to look at it is, he could be a pervert, trying to get the upper hand by confessing to you first. Then should she spill the beans, you have already heard his version. That way, he already has you convinced that he is being victimized by her.
Either way, I find it rather odd that they would want to stay in close contact with each other. Unless there is a little more to the story than you know. It's a very unhealthy relationship. Is there the potential for a repeat performance, under the right conditions? That is what I would be most concerned about. If they were both willing to go that far, being adults and knowing better, then who is to say it may not happen again. Especially is they are still chummy.
If it happened when they were very young, I would say let the past stay in the past. But that is clearly not the case. If you still think you want a serious relationship with this guy, I would make sure he received some counseling. Insist on it, or all deals are off. Sounds like a recipe for future family upset, no matter what. If you like drama, that is what your life is going to be full of.
