This is absolutely outrageous, WTF is wrong with your sister? Is she usually a spoilt brat or is she just being like this about her wedding? Is she younger or older than you?
It's completely unreasonable to expect a mother to leave her 4-6 week old baby for any length of time in my opinion. I don't think I left my babies until around 3 months, and that was for 1 hour max. If you intend to breastfeed, it's just not feasible. Maybe your baby will take a bottle of expressed milk, but you'll still need to go up to your hotel room to pump at the times you would normally feed him or you'll leak/get engorged.
I'm guessing you've got to be there from the crack of dawn to do the whole getting ready together palava too as you are MOH - so she'll be expecting you to leave your baby from 08:00 until midnight?!
I'm fuming for you. Does she have any children of her own? If not, I can see how the request could come from a place of total ignorance, but the fact she won't even let the baby be upstairs out of sight of all the other guests makes me think there's something more to this. Does she hate babies/children?! Is she insanely jealous of you for having a baby? Or jealous of the baby "taking her sister away from her"? She might feel differently when he arrives and is more of a reality rather than a hypothetical scenario, and when she meets her nephew and sees you with him and how close your bond is.
If you are close like you say, surely it should be safe for you to explain why her request just isn't reasonable? Explain that if he is off site 20 minutes away you'll basically only be able to be at the wedding for 20 minutes every 2 hours or so! Factoring in the 40 minute round trip to the alternative hotel, the fact that newborns can take about 45 minutes to have a full feed and then the fact that there is sometimes only an hour's gap between feeds! If she says he can just have a bottle, you can explain not all babies take to a bottle, breast fed babies generally prefer the breast in my experience. I couldn't get any of my babies to take a bottle. If she doesn't get it, and it was me, then I wouldn't be going. I've missed a few friends weddings because they didn't allow babies or they were evening only which was impossible with my first who would wake every 45 mins and look for the boob to get back to sleep.
I'm sorry OP, I bet this is putting a downer on what is otherwise an incredibly exciting time for you. Weddings/hen dos are just impractical events when you have a baby!