Yes, I would say that she is probably suffering from PPD or a PPD mood disorder. If she's experiencing hallucinations, I would say that she probably needs to go to the er. Postpartum psychosis is pretty severe and I'm sure that most dr's would want her seen asap. This is not something that goes away without medication. There are medications (ssri) that are safe to take while breastfeeding. I'm not sure about anti-psychotic meds, though.
I hope your sister is feeling better soon. Is there anyone that can watch the kids while she goes to the hospital or dr?