Wow, its hard to believe this huge shift in mindset happened within 3 days!
Remembering to see S as a whole person, not a plaything, is so crucial... I'm so glad RP helped you refocus! S would have been so hurt otherwise, and you would have felt like the biggest asshole.
The next big test of this mindset will come if (BIG IF I know) you and S start getting involved. Its perfectly natural to think, C and you will make the boundaries. But S needs to be able to make her needs and wants known, as well.
And of course you'll have tons of work keeping C feeling loved, safe and cared for.
Congratulations on avoiding one of the biggest traps!
Side note: C's increased sex drive/curiosity could be more related to her depression being alleviated than anything else. As someone who has had long stretches of crippling depression, once you "wake up" from it, sex drive and overall confidence tend to go through the roof. Might be why she felt ok about bringing up the subject of your feelings for S, as well.