I wish I could give you a definitive answer Minx, as I know how much you will be worrying about this. I'm shocked that your sister would leave her daughter with your mother; it was a recipe for disaster.
- Your mother is the victim of this crime, so if you feel she is able to make a decision, she would have the last word. Your niece is in big trouble with drugs and has already condemned herself to a hard life. Some prison/rehab time might break the cycle.
- Would it cause a breach in the family between your sister, you and your mother? How would that affect your mother's life?
- Pressing charges would be the only possibility for now of your niece receiving (court mandated) treatment, but her parents have that call, if that was the sole reason for proceeding.
- What would you do if it was one of your children?
In summary, I would suggest you go ahead, however this will have repercussions in the family and you and your mother will have to live with that.
Your niece may not benefit from the jail/rehab time, but as she's refusing rehab now it's her only chance of treatment.