I totally get this! Last year we cut off contact following similar behavior but in our case niece is 5 years older and lives in another state so we only saw them a few times a year. This is the cousin closest in age to DD and the only other girl in the family. Niece has always "played" in a mean way with DD ever since she was a baby and we had to do a lot of damage control after every visit. I think we did it too well because DD developed a fantasy about the 2 of them being so close. They did call each other "favorite cousin" but as niece got older she treated DD more and more like a pest. On the last visit she locked DD out of MIL and FIL's house and would not let her in unless she figured out a "password". BIL and SIL both were allowed to enter with whatever word they used but niece never allowed DD's guess to be correct. SIL eventually double locked the door, leaving DD (who had just turned 7) locked outside in a strange place without telling us anything about what was going on. I found DD crying hysterically - it took about an hour to calm her down. Niece insisted "it was just a game" and refused to apologize. BIL and SIL apparently saw nothing wrong with the behavior. MIL tried to make excuses for niece "Oh she's not used to playing with younger kids..." FIL started to yell at DD for "making such a big deal" out of it. That was it. I told DH that I will not bring DD back there for another visit. He is more than welcome to visit his family any time. He is welcome to bring DD with him if he would like but I will not subject her to this sort of behavior again.
Would I allow someone who treats my child this way to continue to visit my home for a week at a time when her parent does not recognize anything wrong with the behavior or try to correct it? No way.
DD has never asked to visit her "favorite cousin" again. She occasionally comments if she sees a picture or a gift that niece gave her. "That was back when [niece] was nice to me." At one point I explained to her that no, niece was never really all that nice to her but now that she is older she was able to recognize it for herself. I'm not sure she understood but hopefully it helped her stop taking responsibility on herself for her cousin's behavior. I hope so anyway.
Good luck. Your responsibility is to your daughter. If your sister can't or won't teach her daughter how to treat people at least you can teach your daughter how to NOT allow people to treat her badly.
