I think this fiddle accomplishes what you're trying to do:
basically the key was to add an each function to do what you were already doing to every sibling. I also removed the div from the siblings function but only because it isn't necessary in the example. Its likely you may still need it in your actual code. Lastly, no .eq(2) exists. Guessing you were experimenting with that one.
heres the new js
$('div').click(function(){
$(this).find('img:hidden').addClass('tofadein');
$(this).find('img:visible').addClass('tofadeout');
$(this).find('img.tofadein').fadeIn();
$(this).find('img.tofadeout').fadeOut();
$(this).find('img').removeClass('tofadein').removeClass('tofadeout');
$(this).siblings().each(function(){
$(this).find('img').eq(0).fadeIn();
$(this).find('img').eq(1).fadeOut();
});
});