Hi concerned sister,
Well, I am not an expert but I have seen a few N kids at our school...it seems that N parents ignore the maxim that parents are the first teachers...they blame teachers for the behavior of their copycat kids. Some kids emulate the abuser because they see the abuser getting all the power and that's what they feel they need. This goes for physical abuse, sexual harrassment, and verbal abuse. We've seen it all at our "nice" school.
My (lame) suggestions are:
1. Ask the child how s/he would feel if some did (behavior) to him/her. Try to drive it home that if it wouldn't feel good to the child, it's not acceptable to do it to others. Unfortunately, some bullies feel it's okay to do bad things as long as it's not happening to them. Do unto others before they do it to you.
2. Try to reward very good and caring behavior. Reward it for siblings as well. Give more attention to the do-gooders than the bullies. You may need to post a chart so they can see tangible results for their newly learned empathic behavior. (whatever is age-appropriate). Go to websites about bullying behavior. I understand there is a new school-based program called Tribes that encourages groups of kids to rally around the victims v. enabling the bully that is supposed to be effective. Sorry I don't have website to refer you to.
3. Recognize that truly some people cannot understand or anticipate the consequences of their actions. Their reactions are impulsive and they need to dump their shame immediately on to someone else. Try to role-play anticipated situations.
4. The child may need counseling to get at his or her feelings about the trouble happening between mom and dad. They may blame themselves. The child may need a counselor to relieve them of blame and guilt and/or to guide them in behavior-mod. I recommend shopping this one carefully (our school counselor is terrible and in need of counseling herself

).
5. You might also want to spend some extra time with the child in question. Sometimes it really is a cry for attention from a needy one.
Well, I don't know if these will work for you, but they might get your wheels headed the right direction. Your sister is lucky to have a caring and supportive family member.

Peace, Seeker