This has to be one of the weirdest threads I've read on here. I don't even know where to start.
The most glaring thing is the magic memory loss about what was said to the niece to upset her. If that was my partner I would ask him immediately what happened/what was said.
Even if he was refusing to say, her own mother knows, so - ask her.
If she suddenly went mute then why not try straight from the horses mouth - ask niece what happened.
The fact neither OP or her husband even checked niece was OK is suspicious in itself.
Then the whole "he went to jail but he's an amazing person and it sounds worse than it was". OP do you think we all rode in on the last horse from Dumbsville?
If it wasn't that bad you'd SAY what it was. As it stands the speculation is going as far as to say he could have hurt or killed a child and rather than clear his name you've continued doubling down and refusing to say.
Lastly, the vitriol you have for SIL. You really do not like her, do you?
That's the real point here. You can't bear her (seemingly because she is very clean living, popular, and has a great career - I'm sure there is a word here beginning with J that describes this......).
Sounds like SIL is sick to the back teeth of you, your husband, and your combined nonsense.
The bed has been made but it seems you aren't entirely comfortable lying in it.
Well sorry but nobody here is replacing the mattress for you, no matter how much you keep trying to spin things in your favour.
I wish nothing but the best for your SIL, brother, and niece.
Enjoy your back ache