Mama I totally agree with sanders it will be much easier for your younger child to understand and process, and less harmful for her, in the long run, if she knows everything in an age appropriate way.
The fact your older daughter says "...she doesn't want her sister to 'even have stuff like that in her head.' Or have her think of her differently." suggests to me that it might be helpful for her to have some specialist counselling in how to talk to you or her sister about this.
It is important your youngest knows how serious this is, in case she is ever contacted by birth mum.
It's also important that your older daughter continues to grow and to know that what happened to her was not her fault, it does not say anything about her as a person, just in case she is feeling in any way it reflects on her or how people will see her.
I think (I don't know but I think ) others will not look down on her and think differently about her because of the actions of others.
It is true some weird people may think differently about people who have had a difficult start in life, been victims of neglect or abuse, but the fact some odd people have odd reactions doesn't mean that most people will, or that anyone has the right, to have an odd reaction.
In some ways I do think maybe it is right that your older daughter is warned to only reveal bits of her life to those who it is safe to do so with (e.g. some boyfriends in the future may not be able to handle the info, some may even use it to their advantage etc) so your dd needs to know who she can trust with this information, IMHO.
Of course, your younger child should absolutely be a person who can be trusted with this information but only in an age appropriate way and only as much information as she needs to understand the situation fully. If your dd wants to keep some things private I think she should be allowed to, as long as she doesn't then internalise things and leave herself with no one to talk to. All our children will have much longer relationship with their siblings than with us, in the normal course of life, so her sister will be her friend, on hopes, and it may well be best her sisters knows her story early and accepts it in an age appropriate way. Just my opinion. I'm an adopter but ds had a relatively easy start, loved but not really cared for and I still have not fully told dd (birth child) the details because it is his story to tell. But with your kids, to some degree, they share a story background.