Hi Venetian
Welcome to the bpdfamily
Thanks for giving us a really good picture of what is happening for you and it's a lot to contend with for your entire family, notwithstanding your concern for your mother and granddaughter , and it sounds like you worry for them is what has brought you here. I can certainly understand your anger in how she treats your mother. This is truly awful to see. These are both very difficult issues and many parents here will relate.
You mention that your sister has been in therapy and that she is aware of the diagnosis but somehow thinks that other's have the issue; not her. I can relate here as my DD27 was diagnosed three years ago. She now says that she never had a diagnosis and is busy diagnosing those around her with personality disorders, including myself. My therapist has led me to believe that this is intrinsic to the nature of BPD.
We all sit on eggshells whenever L is around.
Rangi Kreger is the author of "Walking on Eggshells". This is a great introduction to BPD and if you have the chance to read it, I'm sure will validate much of what you are going through. There is also much information on the board to the right.

It is very interesting how in families, we find ourselves in a horrible situation where we just continue to maintain the status quo. But I'm so glad you have come here as something has triggered you to find a better way.
One very important thing I have learned since being here for six months is that I cannot change my daughter, but I can change me and that's what I have been focussing on. After years of placating/rescuing my daughter at considerable emotional expense, I stopped. I stopped buying into her drama and problems and have been able to set boundaries about her abuse and manipulation tactics of cutting me off to yield an outcome she wants. This has led to me being NC with her but I'm ok with understanding my limits and sticking to my boundaries.
In the mean time, I am learning as much as I can for I truly love her and want to be able to help her as best I can without being her doormat or slave. I've been reading many books, seeing a therapist, talking with as many members here as I can; from whom i couldn't have gotten through without their help and looking after myself.
Your niece is very lucky to have you. My youngest daughter is in your shoes with her big sister (my BPD eldest daughter) and loves her niece (my GD1) to pieces and I'm very grateful for that. It's important that she has health people in her life that help shape her. As for your mother, only she can know her limits too and pave a new way forward for herself and change is not easy.
Please know we are here for you and I encourage you to join in the conversation as we all learn from each other.
I have moved your post to the sibling/parent board so that others can better target the conversation.
Take care and we look forward to hearing from you.
Merlot