Naked pic of my sister going round college :S

tell her she's learnt her lesson ey.
as for the boys they will forget it soon enough.

Why the hell would you be thinking about telling your parents?! Your poor sister - don't do that she'd be mortified! Does she know that everyone has seen it?
I don't think you should tell her off for what she did either or take the moral highground and get all self-righteous about it. She's paying the price now, don't make it worse. She's probably quite upset about this (if she knows that it's being circulated). This is your chance to be the cool older brother and be supportive, not act like a cock and make her feel worse.

It is child porn (technically). If I were you I'd let the guy know that every copy has to be deleted and nobody else will ever see it again - otherwise you're going to the police and getting him charge with distributing child pornography. There's no need to actually go to the police, but it might make it stop.

Get the police involved. Child pornography is being distributed and that is a crime.

No its not. She willingly sent it out and its just a small joke.
Will be forgotten in about a week or so.

You clearly know nothing about boys when they are in groups. Its called banter and will continue until a better piece of banter comes around, and this will last for a long long time!!