it's true that babies do occasionally die while cosleeping. the baby your SIL was talking about could have died of smothering because the caregiver was under the influence of alcohol or drugs, the bed wasn't safe or something else directly related to who or what the child was sleeping near. or it could be the baby died of SIDS and the cosleeping was incidental. babies die in cribs too... at this point in time, it isn't possible to prevent all deaths in sleeping babies.
that very morbid fact aside, cosleeping is very safe and incredibly convenient. if you have a safe sleeping surface (and i believe you don't need to be as rigorous as some might claim) and have no health problems that might affect your sleeping patterns (drug or alcohol use, for example), then most parents are very capable of sleeping with their newborns. i really felt that i was incredibly connected to and aware of my dd when she slept with us. i always knew exactly where she was the instant i woke up, and i honestly felt like she was quite capable of safeguarding her own breathing in a way you wouldn't expect of a "helpless" newborn. she very easily turned her head away from things like pillows and blankets, and was directly oriented towards me and my breast. we didn't really do anything special... kept our normal pillows and duvet, no barriers or positioners or anything.
it's only very recently that i thought a bed railing might be nice, as she's less oriented towards me now and starting to roll away from me, towards the edge of the bed. i was paranoid about her rolling off the bed when she was tiny, but you could literally put her 2 inches from the edge of the bed, and she would start inching her way back to my boobs immediately (in her sleep!).
now, i did end up having her sleep at least a few hours a night on a separate surface (bassinet or crib) because i really started to need to be able to stretch out and move around without worrying about waking her. so even though we're only part time cosleepers now, i really think we got much more sleep and much less stress at night from being open to having her in our bed. when she's sick or teething or restless, instead of trying to wrestle with her in her crib and being up and down a million times a night, she just comes straight to bed with us.