I remember that worry with your first fur baby! Don't worry he looks perfectly normal. What it is, because he's a boy, is his man testicles have swollen because he's warm and comfortable
They often "descend" like that when they're relaxed, asleep or cosy and warm. And they quite enjoy sitting on - what Souffle once called them - their "portacushions". There will be more skin visible in that area without much fur.
I think he maybe just needs time to fully settle in after the recent problem with the bugs and cage clean. In a couple of weeks he'll probably have got some habits and a nesting area (or two). Dwarf hamsters can sometimes sleep in funny places
I would add more substrate though. He might want to burrow down a bit or dig a tunnel - he'd enjoy that.