I hope that seeing that doesn't subtract anything from your lessons with him. Sometimes things like add up to something bigger in your head and it's hard to divide the two. Try not to let your discomfort multiply and just work down to the square root of your feelings and just stay out of his radius for a while....

Report him, ASAP. There are zero moral reasons that a teacher should become sexually aroused while at work, let alone to the point that they feel the urge to **********. That he had the lack of control to ACTUALLY submit to that urge is a display of poor self control, decision making, and professionalism. It also means that something in a school full of children aroused him, barring medical issues as the cause. It's also just plain damn disgusting.