Emily and Peter

Brother and sister. Emily calls him "Baby Peter brother" during the car ride (and from the way she says it and his reaction, it's almost as if she's inferring he has a... baby peter). When Bruno arrives with Schlocker at the gate there was an extended introduction to the characters that clarified their relationship but it got cut out of the film and, weirdly, it wasn't reinstated in the director's cut. I guess Hill thought it was redundant. That scene is an extra on the newer DVD, and it's also part of an extended 8 minute segment on YouTube:

http://www.youtube.com/watch?v=XNycvpwyBZM

Brother & sister. I don't think there was anything naughty between them - the "baby Peter brother" line was just establishing their relationship and his name for the viewing audience. I doubt it was double entendred as a slur on his manhood. It just showed that Emily is the stronger personality of the two siblings.