I wouldn't stop buying gifts for your brother's children, it's not their fault their mother is so horrible and you don't want them to be hurt like your daughter is.
I probably wouldn't go to a lot of trouble of the gifts though- for teenagers, money in a card is fine for example.
Your SIL is horrible, it's not just that she isn't interested in having a relationship with you - abandoning you as their guest on Christmas day & ignoring/excluding your daughter is unforgiveable.
Also, validate your daughter's feelings. They are justified. You don't need to go overboard, into a whole explanation, she's young for that still. But you can say that some people are thoughtless and don't think of others properly, that's it's OK to be hurt but it isn't a reflection on her...Sometimes we meet people who aren't very kind to us but that shows us what they are like, not that we're undeserving.
Don't dwell on it though - just move on. Your attitude of not letting it become a Big Thing for her is the right one: "I know it's hurtful, it isn't anything you've done, some people are just thoughtless. Now what would you like for dinner?'
A Christmas card if you do them is fine for them going forward but I wouldn't do anything else for him & her.
You could tell your mum & brother about your daughters hurt next time it happens, but I wouldn't hold your breath expecting a sea-change in behaviour and if your SIL stirs the pot, it could blow up.