A problem between family members just doesn't affect them does it Harris, there are more often than not repercussions for everyone in the family.
Try not to be concerned whether the support you're currently providing 'suits' your sister InRainbows. What matters is that you are trying to support her and that may be important for your niece too, knowing that her mum's sister is there for her.
You can't fix this and I'm wondering if you feel that you should be able too which is making this all the more stressful. Your niece may well have been through things you're not aware of but there's nothing you can do about that now, apart from continuing to be there for your niece if she chooses to talk about it.
Throwing out unsubstantiated mental diagnosis isn't helpful for the OP, her sister, or her niece I agree Beautyschooldropout.
As the OP hasn't said anything about narcissism when talking about her sister and her niece, it would IMO be more appropriate for you to start a thread on the subject PoppySeadBread, rather than what appears to be an attempt to dominate this thread with your experience of, and opinions of narcissism.
^I highly recommend you treat her like you would treat a narcissist^; how would you treat a narcissist?
A brief 'guide' includes remaining calm, staying neutral, avoiding arguments, setting clear boundaries and not trying to change them and based on what the OP has told us, this is appears to be what she's doing. It's the right approach with anyone who is difficult to engage with regardless of whether or not they're a narcissist.