Some professional intervention is definitely called for at this time. Myself, when I am called for CC&D (counter conditioning and desensitizing), I notice that the dog needs to rely on a strong leader, a protector at the other end of the leash or at the front door, whatever. Think of how your endorphins are shooting out, your body language, your first thoughts translate into body language very quickly and your pup picks up on it! Just a thought, however and not being there I don't get the whole picture I am sure….but you do a good job with describing the scenario and you do seem to take good actions. If putting B-boy in his safe place (crate) makes him feel better, than just don't push the issue with your sister. Has he been around the kids without your sister??? Her fearful interaction from way back when plus her hormones definitely triggered everything (or so it seems...)Good Luck!!!