It's mostly about modesty, I think. You have to go with the assumption that the majority of people don't want to see your naked body. We wear clothes out of respect and good taste.
Female breasts/male genitals have evolved in sync with human instinct in a way so that when we see them, we become sexually aroused. There is a reason for this, because when we see a naked person, our instincts are supposed to kick in and we want to get it on. Having a society where people are constantly sexually aroused will not be very beneficial! And then, of course, there's the possibility that constantly seeing breasts/penises will desensitize ourselves to the think when they're not even sexy anymore. :I
Point being, there are probably a lot less people out there than you think that want to see your breasts or penis or whatever. Letting kids see naked people gives them the impression that naked = okay. I mean, in the proper context, of course. Kids seeing their parents naked shouldn't be a bad thing, or seeing diagrams in a biology textbook or something. But pornography isn't something you suddenly want to become mainstream. If little boys are looking at naked women in suggestive positions, suddenly they're thinking it's okay to become perverts. We shouldn't stigmatize nudity, but we should introduce kids to it in a responsible and mature way. (that's not tossing them a kid playboy when they're 10)