After sex one night, my wife asked me, "Do you ever think about what we'd say if OneBert ever walked in on us?" A bunch of smart-alecky things bounced to mind (such as: "I was checking your mom's oil, and she's down a quart"), but the truth is I'm not sure.
We're not pursuing anything proactively, but when OneBert asks about stuff we answer truthfully. He knows he has a penis and testicles, and he knows girls have "vulvas." He also knows he came to be when my "seed" mixed with Mama's "egg." And that's about all we've had to navigate so far. I'm not sure what we'll say when he asks anything more probing (snort), because a lot depends on how old he is when he asks. Whatever we say, though, it will be as forthright as possible.
If you stonewall your kids, they learn not to be curious. If you misinform them, they'll eventually find you out and learn not to trust you. If you're matter-of-fact about the whole business, and can explain it as emotionlessly as you would how to change a washer, then the kid might not think much else of it for a while.
Besides, who wouldn't want to be around the holiday table, surrounded by extended family, right when your 3-year-old decides to discuss vulvas? It's a lovely memory the grandparents can bring up every Christmas for the rest of their lives.