hi vict17. It sounds as if there may be some difficulties in your BIL's life (possibly issues with his parents) that run quite deep, and the counselling touched a raw nerve. Certainly some types of counselling can be quite demoralising if you are depressed, if they take you back to a bad situation in your life, without really providing you with the tools to come back up again from that experience. It sounds that if the counselling provoked such an extreme reaction that it's not the right thing for him at the moment for whatever reason. I would second MIAM's comments on cognitive behaviour therapy - although your BIL's past experiences will be relevant in terms of providing a therapist/counsellor with a history/an idea of what makes him tick, CBT it won't involve him wallowing in his past, so may still be helpful for him. A psychiatric nurse can provide counselling/cognitive therapy, so it sounds good that he is getting that level of support at home at the moment.
In terms of your sister - it sounds like she a very rough time with the birth and post-natal after care, and as if she may have been quite traumatised by it. You/your sister may find it useful to look at the birth trauma association web-site - www.birthtraumassociation.org.uk. It may help your sister if she could ask to have a meeting with the senior midwife and discuss issues/anxieties surrounding the birth; if she seems keen to talk about the birth and time in hospital it is probably best to let her get her experiences off her chest.
In terms of dealing with your sister:- her self esteem is probably extremely low at the moment; compliment her on any little achievement, on her mothering skills etc, and, if possible, encourage her to get out - to baby massage classes/mother and toddler group, or even just to pop out and get the paper to get a bit of fresh air. Also resist the urge to tell her what a wonderful time she is missing by being depressed; "common-sense" comments like that aren't any help - if it was merely a case of reasoning herself out of it, she wouldn't have a problem! maybe acknowledge the stresses of motherhood/first year/first baby etc.
hope something in this lengthy ramble is of use to you