Go with my instincts at the risk of hurting my relationship with my sister?

My husband and I feel that my only sister's 8 year old son acts very odd in our family social situations around our 3 year old son. It started when my son was first born 3 years ago. My nephew was 5 at the time and he would always creep around trying to watch his diaper changes or watch me breastfeed. I know small children often have a healthy curiosity but the way he acts just gives us the instinct that it is more than just healthy curiosity. He isn’t friendly to us and always keeps to himself which is already odd behavior but then when the baby is naked he shows up out of nowhere. Now I always do diapers and nursing in private but he'll always find a way into the room and he won't leave when asked repeatedly. When I chase him out my sister gets very annoyed and says he's just curious. One time he came in with a camera and was taking pictures of the baby naked. My husband asked him to put the camera away and he wouldn’t so then he started yelling at him and my sister and my husband got into a shouting match. My sister still continuing to see this as all innocent. Now that my son is a toddler and my nephew is presently 8 years old, he is always trying to take him somewhere in private, under the covers, in another room and is always looking over his shoulder to see who is watching. In the past when he has done this we have found him with either his fingers in my son’s mouth, licking my son on the cheek or pushing his head down on his crotch under the covers. We have asked nicely many times for him not to take him anywhere alone and to play out in the open but he never listens to us. I’ve mentioned the odd behavior to my sister and she’s asked him if he licked my son and of course he denies it. Only me and my husband witnessed it because we watch him like a hawk because we don’t trust him. My sister and her husband refuse to believe anything bad about him so they are never paying attention. I don't want to create family drama but when we have holiday's it is only myself and my husband chasing him around and watching his every move and it's no fun for us. My sister and her husband just sit back and act as if nothing is happening and that we are paranoid. We've said,

Hi, Ooh this sounds like a hard situation to be in. I don’t think you are paranoid. To me your nephews behaviour towards your son is odd to the point where it could become harmful to your son so of course your going to keep an eye on your nephew! He needs help in some sort of way, counselling of some sort. It doesn’t sound like its just curiosity it sounds like it’s gone behyond that. I think it must be hard for your sister and her husband to admit that their child acts like this and does theses things. deep down they must know this behaviour isn’t right? I’m guessing most parents want their kids to be normal with a healthy state of mind. But they are not helping their son by not telling him his behaviour is unacceptable or getting him some sort of help. They are letting you and your husband do the work and that’s not right and it makes you both come across in the wrong way. I think id go about it like this : Write down what worries you and why. If you talk to her she can interrupt you. So you get your concerns out on paper. Discuss it with your sister . I don’t think it will be an easy conversation! But I guess it’s to prevent something from actually happening in the future. When the time is right Encourage them to get their son some help because maybe their scared to admit something might be wrong? I think showing support to your sister will help, so help/support her in every way you can. So you're not working against each other.