"She believes that gender is a social construct and as such does not wish to assign dd a gender, until she herself does so."
"the utterly rediculous thing is Dsis bought dd multiple pink gender stereitypical outfits 😂"
Rather than considering going NC with your sister, I am evil enough to have some fun with her blatant HYPOCRISY of saying one thing, but doing another. She says she doesn't want to assign dd a gender, but by buying her gender-stereotypical outfits, that is exactly what she has done! She's happy to do her 'holier than thou' act (a.k.a. 'virtue-signal') but then utterly imposes the commercially-sanctioned gender stereotype of pink-for-a-girl. 'They' my arse!
I'd pretend to be all huffy with her over those outfits, what does she think she's doing, GROOMING her niece into submissive compliant pinkness, doesn't she care about her niece, why would she do this to her, where are her principles? They must be drowned out by her feckless gender conformity.
If she is indeed a sanctimonious activist, you could really put her on the back foot, pointing out she's all talk and no action, ^obviously* doesn't believe a word out of her own mouth, and is no sort of activist AT ALL.
Likely outcomes:
- She goes into a huff at being called out on her glaring hypocrisy, stops coming round. (I'd call that a good result TBH.)
- She realises she's been a bit of an arse and dials it down a notch.
- She tries to make her actions match her words (nothing wrong with a bit of gender-neutrality, sadly your DD will be under seige from it soon enough.)
Either you'll get a decent aunt for your daughter out of it, or; well, you're considering NC anyway 
.