Gregg Araki said in an NPR interview that he shot all of the scenes with the child actors in such a way that they did not know the sexual context of their abuse scenes, and only during editing did he make the movie appear to show children being abused or witnessing abuse.
If you look closely, the scene when the coach rests his head on Neil's chest (at 0:14:45), you can see Neil's not breathing and you cannot see his head. This is because it was an insert shot using a prop for Neil's chest so that the child actor was not aware of the sexual content that was being displayed during the production of the film.
According to psychologist Richard Gartner, Mysterious Skin (2004) is a very accurate depiction of sexual abuse on boys.
In the scene where Brian (age 8) is in the bathtub and his mom tells him to hold his nose to dunk his face under the water it is filmed in reverse so that it appears that his face is under the water at the end of the scene. George Webster is actually dunking the back of his head into the water. The film is then reversed so that at the end of the scene you are actually seeing the beginning of the shot with his face outside the water. This is a trick used by Gregg Araki to get an impossible "underwater" shot.
To prepare for his role, actor Joseph Gordon-Levitt spent a week visiting cities and towns in Kansas where the book is set. Scott Heim, author of the original novel, guided him around the locations and had him meet the actual people on whom the characters are based.
Mary Jane Skalski: the witch who says, "These are the eyes of the ax murderer's victims..." in the Halloween "haunted house" scene near the beginning of the film is played by the film's producer.
Beau J. Genot: the man whose "severed head" is on the table is played by the film's associate producer.