Tammi,
Well I like the fact that he didn't try to cover it up. I give him credit for that. When my kids have done something wrong & when confronted with it & not lied to me, I have been more lenient.
If it were one of my kids, I would have him return it to his sister with an apology. Also I would ground him for at least a week or 2, no priviledges (tv, video games, playdates). I am also harsh with punishment so take it for whats its worth.
Just remember he's young & probably didn't think about what he was doing. At that age sometimes all they can see is the end (his Wii) & not the process to get there. Being a parent can sometime suck eggs eh? (but youre not alone!!!!)