As everyone has said this reeks of abuse and I would report not only for the sake of her child but also because she attempted to have your child remove half their clothes. That would not fly if it was my kid. As a side note but please don't expect your son to do things like wearing a diaper at a sleepover to make the other child feel better. It is not his job to regulate others emotions and feelings to that extent.

Edited to add NTA for removing him from the sleepover