My oldest 3 were 3yrs11mths-boy, 1yr10mths-girl and 10mths-boy respectively when I last did it. I would think that (especially depending on the observed intelligence of your children) they should stop when they start getting to that memory stage (where when they can remember things when they are older all the way back to 3, 4 or 5-depending on the child) and when they start getting too smart and CURIOUS. I personally feel that it is only appropriate up until the toddler stage. After this it will probably start making them think it is ok for 2 children of the opposite sex are ok to be naked around each other. My opinion. Innocence has to be nurtured.
I have a 2 1/2 and 6 mth old presently and will be bathing them together probably up until 4 or five after we teach our 2 1/2 old to bathe properly-and they are boys. I would be a bit leery about the boy and girl thing at your children's age. YOur 8 year old probably should have been out of the tub with his sister when he was 3 or four and she was 1 and 2.
As far as advice for explaining to them, (which I sincerely think is odd for an 8 year old to be so upset about) I would just say that graduating to "big boy hood" means taking a bath alone and doing many things by himself like riding a bigger bike, walking the dog, chores, putting out the trash, unsupervised home work etc. I would tell him that if anyone including his classmates, peers or adults found out he was not bathing alone yet, they would call him a baby and the school might try to put him back in the previous grade? I don't know, just trying to give some idea for you. God bless your efforts, and seek Him for direction, He will tell you what to say overrall! Do the same for your daughter also.
I don't know if you teach them about the tooth fairy, Santa or the other fictional people, but tell them they don't visit anymore if you don't grow up by doing things such as bathing on your own like a big boy or girl.