Hopefully someone else will chime in with something more useful though, idk... .possibly I am a bit more cynnical than most, idk, maybe not... .just not sure.
My I make a couple of observations from the perspective of having been the child who was subjected to an emotionally incestuous relationship by an uBPD mother - father left home when I was about 7 years old.
IF it really is a case of emotional incest, then it is a situation which has been created by the mother, not the child! If emotional incest then the child has likely been psychologically and psycho-sexually abused by the mother. The child is the victim. Not the mother! The child may be responding in some ways that have been "groomed" by the mother on the one hand and in some others which derive from their protection mechanisms.
IF emotional incest the child may face years of personal growth to overcome the pervasive psychological impacts of their childhood - anxiety issues, emotional issues, difficulty with relationships and intimacy. The child may need a lot of professional support to be nurtured through the healing process. This may or may not mean the child will need to be independent of the mother (effectively "separated", which the mother may not like!
IF emotional incest then the mother is beset with some quite vexing psychological issues! Talking it through isn't going to fix the underlying problems. If emotional incest you are dealing with somebody who has pervasive psychological issues possibly reflecting their formative experiences (they could have been abused themselves in their childhood, for example) and genetic predisposition or personality type.
Please may I offer some ideas?
It might be prudent to seek professional advice (by yourself) in the first instance to try to clarify what you might be facing in this situation. Maybe it isn't emotional incest - just a case of a needy child for some other reason (?).
Then you might like to ask yourself what the implications are for the dynamics of your relationship with your fiancee and potential step child. What do you want out of a relationship? What are you prepared to do to realise the relationship you seek?
It seems there may be three choices:
1. Accept the situation and whatever strengths and weaknesses it presents because you see value in your current relationship
2. Confront the situation (which might only be resolved with both mother and child accepting their issues and seeking to heal themselves, probably with professional support) and risk resistance and a shift in your current relationship dynamics
3. Walk away and leave them to sort it all out themselves or individually - too hard basket and you're not a psych professional qualified to fix such a intractable dynamic!
In your position, I would want to assure myself that the real issue is indeed emotional incest because the implications are sobering (your partner is potentially a child abuser and you will need to accept the fact!).
If you choose options (1) or (2) please do not underestimate the intractable nature of the situation and the long term struggle for these people to find their inner happiness.
Please also consider that if it is emotional incest your fiancé is (emotionally / psychologically) dating two of you - yourself and the child: potentially you are never to going to enjoy a "normal" relationship until this situation is fully resolved (if ever).
Please consider that my position may be a lot more cynical that others (having coming from the background of being abused through emotional incest) and others may see other options and ideas more relevant to your particular situation.