First of all, don't rush to overlook one vital fact.. his fetish (if you can still call it that) is with braces.. the CAUSE for that could be ANYTHING.. it could be a girl who he first stood a chance with in early childhood, it could be a girl he desired later in his childhood life, usually fetish-patterns are caused by recollections to individual people or events, NOT a large class or category (with some exceptions)..
If he is truly a pedofile, he would have a buckled-shoe fetish, a pleated skirt fetish, a pigtail fetish, lolipop fetish, and the obvious school-girl attire fetish (also caused by too much exposure to japanese culture)
I can definitely tell you this.. It's one of those out of the ordinary fetishes.. I first thought your post was a joke.. but I remembered some of the things my brother has told me, and then I re-read it and took it seriously..
Also, consider this.. He told you about this serious fetish of his.. that takes a HUGE degree of comfort and trust, and he's also considerate (his tactful self-control and reaction w/ the girls).. So I could imagine a situation where the object of his sexual desire is still YOU, but the "braces" act as a bonus stimulus that adds the emotions he felt for something/someone back in his childhood past (he probably doesn't even know who or what.. it's not even a clear thought/memory at this point, all that's left is a faint/blur of an emotion..).. In addition if he fessed up to "braces", fessing up to "younger women/girls" falls in a much LOWER threashold.. so if anything, he would actually express THAT fetish to you first! But he didn't, so his "braces" fetish is the only one that's in place.. And that fits into his story of feeling some form of attraction towards these girls from the waist and up..
In other words.. what he's trying to express, "which he doesn't even know how to formalize it and express it clearly himself" is.. (I don't feel sexual attraction for these girls because of anything about them related to age or them being school girls or catholic, etc... BUT! they are wearing braces, which brings up those emotions from childhood or whatever.. and when those emotions are stirred up, they create a strong feeling of romantic attraction.. like a "crush").. hence, "I was only attracted from the waist and up".. think about it.. think about the deeper subconcious meaning of it!
The right way to handle this.. is simply talk to him and tell him.. you have no problem entertaining his sexual request.. after all, he'd do whatever he could to make you happy, and you want to be able to do the same and show that same level of devotion to satisfying eachother sexually.. BUT! lately, and in lieu of recent events, you're feeling very strange, uncomfortable, and worried about the "possibility" of what his fetish can imply.. so, just to rest and relax your mind so you're not worried.. AND so you can feel comfortable entertaining his sexual request in the future, you'd like to go "together" and start speaking to a psychologist "together" about everything that's been going on.. because you just want some comfort knowing that it's not something you should be worried about.. for the (2) reasons I told you about..
It's a simple and reasonable request.. and you shouldn't put drama into it.. no yelling, don't make him feel like you're attacking him.. you're NOT.. not at all.. after all, this is EXACTLY what you want to do.. you want to make sure it's nothing serious.. and that's a great first step in feeling like the two of you are working together to make sure it's nothing to worry about.. AND so that you can BOTH feel comfortable engaging in this fetish in the future..
Best of Luck
If you can't stop the Wind, then you can't stop the Storm.