But, I feel that by making nice with my brother, I am letting brother feel that I am on his "side". I think he would have a better chance of recovery if I were to walk away, but by doing so I put this little boy at risk of being THERE.
You can't affect how your brother feels about you and what you're doing for your nephew. I hope you are able to talk to a couple more lawyers about your prospects before you resign yourself to play-acting with your brother for the next dozen years. You don't actually have to *be* on his side, but if he feels that way, well, hey, think strategically.
This is where Al-Anon or a great therapist will come in handy. This is where you can learn how to interact with him when you have to without feeling anxious and emotionally entangled. In my experience, this is one of the best things I did for myself for when I have to be with my alcoholic husband. It keeps me sane, where before my blood would have been boiling and I would have listened to and argued with every harebrained threat and argument he threw at me.
I think you're doing very well despite the circumstances. Not many people have the cojones to do what you're doing without any kudos or financial support, and those that do, in my mind anyway, have a direct phone line to god.