K.J.
It sounds to me like there was a time when the younger brother DID need a parent so older brother stepped in and that that time is passed.
On the other hand, just about every oldest sibling I've known has "parented" to some extent. My older sister did; my oldest daughter did. I see it among my cubscouts and among my school kids.
It might help if you could find someone else who has been there to help guide and give advice. You can't necessarily just strive to determine to what degree it would be "normal" if previous life circumstances have altered their relationship to each other--normal for them would be different than for someone else in different circumstances.
I would try to work toward what is "healthy". I don't think the older brother should be punished for trying to take care of his brother. You don't say however what kind of discipline he is using-- if he is hurting in his discipline (spanking, etc), remind him that he cannot hurt his brother and give him consequences for that. If he tries to give brother time-outs and other less punishing forms of discipline, remind him that "I am the parent in this family and I will determine what consequences need to be given." (Make sure to give the same one for the same offense so you aren't favoring one brother over the other.)
Try to have set rules and consequences. If you argue with M. or Dad, you get 2 minutes timeout. If you hit your brother, you get 10 minutes alone in your bedroom. Then you are "just enforcing the rule".
Also remind little brother that he does not need to submit to older brother's discipline--that he can come and talk to M. or Dad when brother is trying to make him "be good".
Good luck. I bet they are the joy of your life!