The Dad wants the kids to learn that some actions have harsh consequences. If he was really promoting an incestual relationship he would've made Leon stay in the room. He wanted them to know the facts of life and human biology, he wasn't as concerned about emotions.
I was a big fan of Stargate Atlantis where David Hewlett plays Astrophysicist Rodney McKay, after watching this film I will never look at him the same way again.
If wishes were horses, we'd all be eating steak.
Jayne, Firefly

There is a definite incestous vibe given but I think it was from Leon then Ursula. This was just a product of their strict and crazy upbringing.what kind of Dad suggests to his son to watch his sisters abortion?

The brother was always jealous of the sister's relationship with "Pin"
That's not entirely correct.
The brother gets angry with the sister at time because she has out grown PIN and sees it for what it is, a dummy.
I just watched this movie and found it quite bizzare and creepy.
I thought that the brother was a bit socially underdeveloped, he even said as a young boy that he doesn't have friends.
This would explain why he is so attached to his sister and PIN. PIN (with the help of the father) teaches the brother and sister about the facts of life.
When the brother and sister are late teens, the sister out grows PIN but the brother still hangs on. The father realising this too late.

Leon can't relate to anyone other than Pin and Ursula so in his mind she becomes his sole love interest. It's disturbing and not really played just to be sickening, which I appreciated. This is not a movie that offers easy answers.

I read this book, Pin, written by Andrew Niederman. The book is far more graphic! The siblings think nothing of stripping in front of each other and sharing intimate details about their love lives. But the book is far superior to the film (as is with most) I would go into details but they are too extreme and I don't want to get banned.