I've never understood what the idea is there, why would seeing a naked person be so damaging to children? It just seems so ridiculous. What's supposed to happen to a child that sees nudity? Around here, kids see naked people all the time (for example in the changing rooms of public swimming pools).
I think might even be bad for children NOT to see naked people. It could indeed have a bad effect on them, I think, e.g. cause self-confidence issues when they grow up, because they wouldn't know what things are going to be like, if it's normal etc. Moreover, it allows for creation of totally unrealistic, photoshopped beauty ideals, because children/teens see (nearly) naked people mostly in some kind of highly altered adverts. Seeing the real thing brings them down to earth...