I also had a talk with my son and told him that I was glad that he told me about the picture and I was glad that he was able to tell me how he felt about it. I was able to calm the tears and anxiety that he was feeling.
Is there anything else that I should do or say? This neighbor boy has also been inappropriate in other ways. He talks back to adults and teases other kids.
I would not have encouraged you to contact the boy's parents about this incident. Whenever possible, I think that it's always healthier to let kids work out their differences without the intervention of adults/parents. Unless an adult is witnessing an interaction between kids where there is legitimate cause to fear considerable physical or emotional harm to a child, I prefer to let kids learn by themselves.
Even if this boy never plays with your son at your home again, your son will have to encounter him in the neighborhood, on the school bus and in school. At nine years of age, a boy does not want the reputation of being a "Momma's boy." The fact that you told this boy's parents about the picture and your son's tearful response to it may create some social problems for your son. He may now be taunted by his peers as a "squealer" and a "Momma's boy."
As opposed to banishing this boy from your home and condemning him, I might have taken the position of trying to discuss how sad it is that this boy seems to be so troubled and angry. I understand that this kid has earned a bad reputation but sometimes our children learn more when we use these situations to show them our compassion. I understand your good intentions. Maybe you and your husband might discuss how to handle future incidents with other kids (I guarantee you there will be future incidents) and seek to offer your son some practical tips on handling them (and the aftermath of this incident). Thanks for writing.