All perfect praise be to Allah, The Lord of the Worlds. I testify that there is none worthy of worship except Allah, and that Muhammad, ﷺ, is His slave and Messenger.
If your sister is a Muslim, then you must inform her that it is prohibited for a Muslim woman to marry a non-Muslim man, because of the command of Allah (which means): {And do not marry believing women to polytheists until they believe} [Quran 2:221]. (This prohibition includes other types of non-Muslims as well.)
However, if she insists on [allowing her daughter] to get married [to a non-Muslim], then it is not permissible [for you] to attend such a wedding, as being present would be considered an affirmation of a contract that is Islamically void, and a welcoming of a major sin. A Muslim is prohibited from witnessing evil practices and being content with them.
Furthermore, refraining from attending such gatherings and events is not considered a severing of family ties; rather, it is obedience to Allah.
Lastly, as for your niece — given that she is unfamiliar with the rulings of Islam and has only just begun to learn and observe them — it may be that she is likewise ignorant and unaware of the ruling on this matter. She should therefore be informed with wisdom and gentleness, and it should be made a condition upon whoever wishes to marry her that he become Muslim before the contract, in order for the marriage to be valid.
Allah Knows best.