I never grade my papers with red ink. I always use fun colored pens. The kids like it better. And believe it or not, red ink is harsh.
And as far as the discussion about what the little girl wrote on her arm, I don't think that's a clear sign of abuse at all. Is she seeking some sort of attention? Absolutely. I teach 7-8 year olds and they giggle about kissing and the like. Most of the time they don't understand these things as "sexual" just as something silly. What she wrote on her arm wasn't appropriate and if I were in your situation, I would notify the school's guidance counselor who is trained to identify signs of abuse and end your involvement there. I would definitely not call any form of abuse center or "report" anyone because of a phrase on the girl's arm.