The only issue I have left is my sister and her mannerism around the kids.
I took a break from setting boundaries because honestly it’s brutally exhausting but I won’t let this fight go to waste.
If she doesn’t want to talk, great more time for me alone.
I think this is a good attitude about the silent treatment. It's actually considered a form of verbal abuse, and if it doesn't bother you- great- because that means it won't work to get you to cave.
I understand that it's hard to hold a boundary. Saying "no" to my BPD mother is very difficult. She seems to see boundaries as a challenge and she can be persistent. But each time this behavior succeeds at getting you to cave, you reinforce for her that it works. Good for you for not doing that.
My father's family seemed to be on to my BPD mother's issues very early on in my parents' marriage. They had the sense to not say anything. Much of what I know is from relatives who answered my questions after he passed away. They didn't discuss my mother when we were children and I think they were wise to keep that to themselves. As adults though, we had questions.
My BPD mother disliked my father's family from the get go and it was mutual. My mother sees people as being on her side or not her side. Keeping her issues secret was a priority for my parents. If anyone suspects otherwise, they are "not on her side". I suspect that since my father's family had concerns about my mother, she considered them to be some kind of threat.
I also think gender has something to do with it. Your attention towards a sister may be seen as some kind of threat to your wife even though attention to a sister is not a problem at all but she may see it as taking attention away from her? It's also possible that she perceives your sister as someone who is "not on her side".
Bottom line: your wife will feel however she wants to about your sister and will say whatever she wants. You can't control that. But you don't have to listen to what she says about her. You don't even have to say anything about it but you can cut off the conversation if she starts, or leave the room. I found that actions are more effective than words.
As to badmouthing her in front of the kids, that's a lot harder to control. I have heard my mother say all kinds of things about my father's family. I don't believe them though. If your kids are young, they should not be subjected to this but it's hard to control what she says unless you are watching her 24/7 which is unlikely. I don't know how to handle this one but in our case, my mother was happy to have us stay with my father's family during school breaks and so we got to know them and got to be attached to them and form our own opinions.
Most importantly, do not let your wife ruin your relationship with your sister. This is your sister, your relationship.