Just for the record could you give us a bit more detail re: type of school, an outline of the type of bullying etc.
I am appalled that head of year is stalling your sister and isolating your niece. Don't waste any more time with this person but instead ask to see the Head. Make sure to get the school's behaviour and bullying policy - sometimes you can find these online on the school website before you see the Head. Tell the Head that it is completely unacceptable that niece is being isolated like this. Go through the bullying policy with them and ask them to provide evidence of how they have followed it (I doubt that they have) and how they are going actually sort it out following the actual policy. Make sure you get firm dates of when things are going to happen eg daughter back in playground, parents spoken to etc. I know that one of the parents work at the school - I would bring that up and say "I assume that there will be no conflict of interest" regards not letting parents know. Follow this up with a letter confirming what was agreed at this meeting.
Make sure that if the niece is bullied, you write it down/log it and send a letter to the Head straight away about the incident. If you are not happy with how the school is handling it, you can write to the Chair of Governors. Also speak to the local education welfare officer and the GP about the effect the stress is having on niece. Personally, I would give it a time frame and if your sister is unhappy with the outcome the school have provided and its too much for your niece, I would look to move schools.
Is she year 4? Something happens in year 4 that seems to change the dynamics. I'm not sure what but its one year group that I refuse to teach.
Anyway, I'm sorry this is happening to your niece. Does she have other friends that she can invite for play dates and does she belong to any clubs outside of school? So that there is more to life than just these bullies.
My niece (nearly 9) is being bullied by 3 girls - formerly her best friends. Sister reported it to head of year, niece has moved class this week, but the girls are persisting in harassing her at play time. To deal with this, the head of year now says my niece should stay in at play time. Head of year will not involve the parents - one of whom is a teacher at the school. How can I help my poor niece and sister? Desperately worried and sad for them both. (I have re-posted this from another topic area)