A similar narration is reported from Sayyiduna Abu Musa (may Allah be pleased with him), except that Asim added that the Messenger of Allah (peace and blessings be upon him) was in a place where there was water, and he had uncovered his knees. When Sayyiduna Uthman (may Allah be pleased with him) came, he covered them.
There is no proof in this hadith for those who hold that the thigh is not awrah. His (peace and blessings be upon him) having uncovered his knees before Sayyiduna Uthman (may Allah be pleased with him) came in only indicates that the knees are not part of the awrah. The hadith of Amr bin Shu'ayb likewise indicates this, and that the navel is not part of the awrah; rather, the awrah of a man is what lies between the two (the navel and the knees).
Hadith Referenceالسنن الكبرى للبيهقي / كتاب الصلاة / 3246