Red, as hard as it will be, you just need to step way back and look the other way. The fact that your sister came to you with the kids shows that she did understand the harm and will possibly find refuge with you again, hopefully for the last time. These guys can be such sweet talkers.
The thing is, if you push, she'll push back. If it all blows up again, at least it won't be as much a blow to her pride if you haven't pushed your opinion on her.