OP here. I’ve been away from the boards but I wanted to come back and thank you all for your input and ideas. I feel I need to add a bit of history for the clarification and also an update.
The history: In early 2008 my niece, BIL’s DD went to his office unannounced to find her father and the now SIl, then mistress, groping each other in his office. She went back home in tears, told the mother who went bezerck on the phone with him. He came home later than night, packed a bag and went to the mistress.
Couple of months later, wife wants to reconciliate, he doesn’t and she starts the divorce papers. About then he introduces us the ‘new girlfriend’. Then, there is talk among them about custody and visitations of the children, and the first Christmas. This is when I come into the picture being asked to negotiate for him with my niece and get her to accept the situation and come to us for Christmas as he wasn’t available -- Paris trip with girlfriend (it was decided that he’ll have DD then by court). So, of course I speak up my mind, in behalf of her First , his DD feels guilty for the divorce, because she found them and told the mother. Remember, this is not his first affair and somehow, the DD knew and kept quiet about the others.(It was later confirmed by MIL, who knew as well)
Secondly, I told him that he went wrong about how he dealt with it all, that it would have made a world of difference if he moved out on his own, divorced the wife and then introduce the kids to the new one when they were ready to deal with the situation. But don’t spring so many changes on these kids in just a matter of less then 6 months. Anyway, I was asked, I talked, I was polite and decent.
Now, last year the new SIL got pregnant and they got married as soon as the divorce papers were final. And, we’re not invited to the wedding and later to the Christening. I didn’t ask why, didn’t get offended. I was just fine with how things were until last Sunday when my Mil came after me for being the reason why things are weird between DH and his brother because I dared open my mouth and defend my niece when anyone else in the family wouldn't take her side.
Basically, I don’t know where SIL is now, and I came here to clear my head and see if I need to approach her and clear this out or should I just let things cold and distant the way they are now by default.
I never criticized new SIL directly, I never said anything about how I think she was in the wrong. As far as I know it could be only MIL’s assumption.
I don’t feel I owe them anything. It would have made a world of difference in my eyes(and DH's) if they would have made a statement along the lines, we know this looks wrong but we love each other,we hurt some people and we're sorry etc. But they said nothing and somehow expected that everybody would be just fine.
DH and I were not. They showed us their true colors and we don’t care for them. Just because they got married and she is now the wife doesn't right the wrong.
This is the update bit, DH and I talked and we decided for the time being not to say or do anything. We’ll keep an open mind and things might change in the future, specially since there is the new baby, which in the end, yes, it is our niece. But, again, for the moment, it is all too soon and all too wrong to us. And MIL needs to butt off. Forgot to mention that the baby pics I got from SIL were on a list of people, not addressed to me directly. I replied with a thank you and neutral comment, she didn't answer back.
Thanks again it’s been good for me to clear my mind here.