Is it normal for a dog to do this?

While some dogs are less or more likely to do it than others, I believe this is a common habit amongst dogs to hump their own puppies or other strange 'partners'-they have been known to do this with stuffed animals, siblings and even people...I am not 100% sure as to why they do this, but I believe it is a habit stemmed from curiosity, with some dogs being more prone to it than others depending on how randy they are by nature XD As a matter of interest, is Beast an older dog by any chance? I heard that senior dogs are also more likely to do it, though it is often simply a show of dominance rather than anything else. Also if he is only 'mounting' and not anything...else, this is a common play gesture among some dogs (although bearing in mind the pups are much smaller this is not such a good thing).

As for what you should do with him...well, neutering him will reduce the problem (although neutered dogs may also perform this behaviour). Other than that, try removing him whenever he does it and say 'no' firmly, before distracting him with something else. In the wild, a female wild dog or wolf will drive her partner away as soon as her pups are born, as unlike the mother the male dog rarely feels any attachment towards the pups when first born, and so are more prone to unacceptable behaviour; perhaps you could keep Beast away from the puppies until they are bigger? By which time, he might perhaps have gotten used to the puppies and not be so inclined to...you know, and if they are bigger they may be able to stand up for themselves a bit more.

Actually, father/daughter or mother/son matings often turn out fine. It really depends on the dogs involved, if they are carriers for any genetic diseases or not.
Inbreeding can be useful in breeding for specific traits, actually, so it's not always a bad thing. (However a breeder should have a pretty good understanding of genetics so that they know what they're doing before inbreeding.)