My dog is neutered but he still licks that area... prettymuch all dogs do regardless.. for self-stimulation or grooming or whatever... doesn't mean anything psychological.
Unless he is of such exceptional health/form/intelligence, you really shouldn't breed him.. so he doesn't need his balls for anything. Why not then decrease his odds of getting sick?
At 3.5 years, IMO you're too late to change behavior much. Neutering at ~6 months - 1 year~ is a good way to prevent unwanted behaviors from developing (like humping and territory-marking) but those motivations are likely well imprinted in his brain by this time.
It may still be beneficial in lessening the urge to escape off to find bitches. Neutering generally helps to focus the dog on his owner/family instead.
If you're responsible, you won't contribute to pet overpopulation, so why torment him with desires that he can't act upon? Turn it off and he'll be content with just you.
