ddccing here, but you've brought it up, heard what they have to say, now i think it's probably best to drop it. if you DO end up having a boy and he's born first, feel free to use it. chances are they won't use it if you do, because even if THEY think you stole it, everyone else will just think they're weird for using the same name. if you don't have a boy, there's no point in making a fuss about it now.
it sounds like your brother really didn't remember that you shared that name, and even so, it sounds like your SIL might be "in charge" of names anyway, so if your brother didn't tell her about your conversation, she regards it as hers.
if they DO decide to use it regardless, oh well, it's really not the worst thing in the world to have cousins with the same name. they might even think it's really cool to have the same name. but IMO, it's not worth making a big deal about it before you even know it's really going to be an issue.
it's so funny how touchy the name thing can be. my sister and i almost came to blows (joking... but not really

) over the fact that we both wanted to use the same middle name for a girl. in the end, we didn't both have girls, and we also realized it would have been a nice bond for two cousins to share that special name anyway. but we weren't able to calmly come to that decision until both our babies were in arms and we realized we had over-reacted some.