Ugh. I know how you feel. My sister circed my twin nephews, who are now 15 months old. She's a nurse, so that made it all the more surprising, for some reason. Anyway, I knew it wasn't something within my power to change at the time. All I know is that I didn't want anything to affect my bond with my nephews. I do feel sad every time I see them naked, and I wouldn't change their diapers until they were a year old. I love them dearly, and they're just the sweetest little things.
It has opened up the opportunity to talk to my own children about circ, though. My dd is 8 and my ds is 5, and they like to take a bath with their little cousins. They've both asked about why their penises look different. I tell them the truth. They're shocked that parents would allow a doctor to do that to their baby.
That said, I would have a heart-to-heart talk with your sister and express your concerns about her partner's blackmail. She'll really need your support if (and I think it's a good possibility) things fall apart with him in the future. I'd straight out ask her how she would feel if he jumped ship and she'd done something to hurt her baby because of him.