Unfortunately, from the sound of it, this is only the first of such things that are going to offend and annoy you over this baby.
1. As you say, your bro. and her think their poop doesn't stink anyway..so accept that she is a bit of a self-centred b***h, and will not change any time soon.
2. She is a first-time mom, and taking that together with her nature, this baby will NOT be shared with her husband's family.
3. She doesn't care how your kids feel.
I don't know what you can do about all this, except to act as you would over any new nephew, in spite of it being under sufferance on her part. You can do that at family gatherings, and who knows?? Maybe motherhood will soften her up. It is hard to be bitchy to someone who is gooing over your baby. Cheers and lotsa luck, Sera