I had trouble reading the wall of text too, but I skimmed. Basically, it sounds like you forgot your role in all this. You are your daughter's Mom. So, if you don't want your daughter watching kissing, your niece can't watch it or can watch it with her private TV as long as your daughter isn't with her (of course, if niece doesn't have private TV, oh well, guess she can't watch it under your roof.)
Babysitter assumes you have the say-so to merit out discipline. If you're not given that responsibility you're no babysitter. Your her maid while her mom is gone. So, talk to sister to make sure that's understood, then... take back your house.
Remember when you were growing up that annoying rule, "You will do as I say as long as you're living under my roof?" Guess whose roof it is now! You are officially given license to use that one for niece and sister. If sister doesn't like it... well, we all know that rule was, in part, to get kids out on their own, so maybe it's time for her to get out on her own, IF she can't stand the rule.
Stand up. Your the Mom. It's on you now. And, yes, to an extent, you are your sister's Mom to until she gets her own place.
There's a reason there is a saying about two women under one roof. Each woman feels it is her domain. Well, it's your domain, so take it back. If sister doesn't like it... well it is much easier to get along with family when we don't live together. lol