My stepson

My 8 year old stepson has been in our custody for a year now. He was really nice when he came to visit for three weeks the previous summer but after we got sole custody of him and he had to follow rules and manners we got met with a bad behavioral change.He was exposed to witnessing sexual situations when he lived with his mom. He witnessed several sexual acts of his 15 year old sister and an adult male. His mother was charged with several felonies and arrested. He stayed in Dss custody living with his paternal grandmother and the sister for a year while we went to court for custody. It was a multiple state battlw which we finally won. But as I said his behavior was a changed child. We have had him in therepy for about 4 months at a local rape crisis center and his behavior is worse. He has no reguardes for his personal hygiene and no reguardes for any rules we have set. He has exposed himself to my 3 year old son once and tried to hurt my 1 year old daughter once. I have not permitted him to be around them alone for even a second since then and they are in a crib and toddler bed in our bedroom. He has tried to get my 3 year old to follow him to his room alone on numerous ocassions. I fear for my little ones. My husband and I have talked many times on what to do. He seems to have no remorse for anyone. He shows no love to anyone. And no disipline actions we have tried work. What do we do when we have now ways of disiplining him? We have considered taking him to a mental hospital for evaluation at the advice of his therepist. I feel that I will never be able to trust him safely around our other kids and am at the point of being so creeped out by alot of things he has said and done to just want him to go somewhere else and get the help my husband and I cannot give him.He has alot of supressed anger and I am afrid he is going to explode on the rest of us.Are we considering the right actions?Help me with any information you can give me please. I have to get him on medicaide before taking him to the mental hospital because we cannot offord otherwise.
Thank you for your time,
Gayle