God, my family is the exact same way. Even now, when I'm watching TV with my parents and my brother (who is 19) if there is even any kissing in a movie either my dad will fast forward it or it'll just get really tense and awkward like you said. I also wasn't able to swear or really do much of anything when I was younger, because with a nurse as a mom and a teacher as a dad, either I was going to die or going to do all the bad things my dad's students would do whenever I left their sight.
It sucks being really sheltered as a kid mostly because now I feel like I can't really talk about anything with my parents. Like I never tell them about any girls who are in my life, or tell them really much about my personal life at all. It's like there's this wall between us because we're just so different from each other now because of how prude (for lack of a better word) they are, and I've basically turned into the exact opposite of that. When I'm with my friends I'm actually normally the really offensive kid who says things too loud in public, and I drink and do things which would just absolutely shock them. As soon as I step inside my house though I have to turn back into this polite, goodie-goodie kid, because otherwise I feel like my family would just be absolutely shocked at who I am when I'm not around them.
Good luck with raising your kids differently though. I have a younger brother who's 12 years younger than me, and every time I'm supposed to be taking care of him I find myself acting exactly like my dad did with me, despite the fact that I feel like it wasn't really the best way of going about things...
Ahh man that sucks. Thankfully I wasn't pushed to the point of acting out completely. When I was 17/18 I had a bit of a stage where I acted out just to see what it was like but it wasn't a constant thing, just occasionally. Yeah we're the exact same if it's stuff like that, only we don't fast forward.
The worst part is when it's a movie that my parents really want to watch. And something will come up they're not comfortable with and they'll ask us to leave the room so they can watch it without feeling awkward. That's just... terrible. And it makes me wonder why the hell it's so awkward.
On a different note, and also the reason that I don't act out because of it, is that I only really started seeing it as an "issue" in the past few years, in high school I just thought that was my family dynamic and there was nothing wrong with it. And I guess, in a sense that's true, but still, being repressed to that extent is terrible.
And as for how you treat your little brother, it's really hard to do. Pushing your understanding, your brainwashing for lack of a better word, aside to treat someone properly is damn near impossible. But as long as you're open with him, he'll talk to you about more things.
I have the exact same distance with my parents and brother. I love them, don't get me wrong, but there's something about them that feels like no matter what happens, i'll never be as close with them as I'd like. I'm not even really sure if they like who I am as a person.
But then again, that's just me.