Setting aside the bedwetting itself -
Your sister is completely in the wrong here.
Fair enough, she can use whatever strategy for the bedwetting that she pleases, but she has no right whatsoever to impose her strategy on you, particularly when it involves a whole lot of work and, since you were not expecting it so may not have mattress protectors, damaged mattresses.
She COULD have had a conversation with you before your DNs stay and come to an agreement with you; but she chose not to. Instead, she told your niece that she was not to wear pull-ups, knowing that this would create conflict. This was very deliberately done.
All you can do is minimise the situation. Mattress protectors, etc. Point out to your niece & nephew the extra work involved if they do not use pull-ups, and involve them in the extra work - helping stripping their beds, helping loading the washing machine etc. NOT as a punishment, but to learn that decisions have consequences that must be accepted.
Your sister is being very stupid here. She had you willing to take her children for a week, so that she could go on holiday. Well, you're never going to offer that again, are you? Stupid, stupid, stupid. And I would be texting her to that effect. Pointing out that she has set you up and that you are not happy with her behaviour at all. And that if she does not phone her daughter and tell her to do what auntie has asked, you will never so much as babysit for an evening again. Oh, and whe will have to pay for any ruined mattresses/bedlinen/new protectors.
Do NOT let your sister get away with this. And I have to ask - is this the first time she's behaved this badly? Or normal for her?