Umi's remark (page 11, panel 2) is not meant to imply any sort of incestuous
behavior between Umi and her father. In Japan, the whole family, mom, dad
& the kids, traditionally bathes together (until the kids outgrow the practice).
Plus, Umi and her dad, being carefree islanders, probably go skinny-dipping
together once in a while (along with mom). On page 16, bottom left, Umi was
about to step out and casually greet her father, so she's used to being seen
naked. Her family clearly takes a relaxed approach to nudity.
For all those reasons, Umi has probably seen her dad's penis many times,
but never erect, which is why the MC's boner looks "so different."
Note that the MC himself isn't the least bit perturbed by Umi's remark,
so he obviously takes it for granted that Umi has seen her dad naked,
for the same reasons I have outlined.
Great ending!
Yeah, that is one great dad, just waiting for that one guy who isn't scared to ask for his daughter in front of him.
Just have the courage to go forward, and you might find out he's a really nice father in law to have.
DAYUM! ... I think the saying is: "Fortune Favors The Bold." (or something like that). Protag-kun decides to "take responsibility" (after all, Umi-chan knew virtually nothing about {ahem} "this and that", beforehand), and gets the father's consent (the lucky bastard).