OP, you are managing this so brilliantly. I know you must feel wretched at even having to confront this and it will be bound up in so much grief, sadness and anger because you're carrying your own feelings, your child's, your mother's and now those of your niece. And you knew you had to act because it felt so wrong when it all got brought up again but now you are tied to the rocket in order to protect your family, including your own child.
I can understand a little bit I think. Not quite the same but I've always struggled with FIL. I met DH when I was a teen and FIL was a man in his 40s. There were looks and comments, squeezes whilst hugging hello, with a groan and a shudder in my ear. ,That sort of lecherous shit. I navigated it as best as I could and in the whirlwind of us moving away for uni and then work, marriage and children, they were sort of in the background and I kept out of the way at family events. It was okay. Ish. Until years later when DH was deployed abroad and FIL kept coming round to "help" ostensibly. All looked very normal and he was looking out for his DIL and two young grandchildren. But his comments had an edge and he'd try and cuddle me in front of the children and tell them "ooh I like it when mummy squirms". I could feel he was aroused iyswim. I think I sort of felt how you described in your op. My reaction was visceral. I felt shaky and angry and like I was on a precipice. I also felt trapped by my love for MIL, my wider family, my DH. I started thinking I couldn't stand by and do nothing but was in such turmoil about what to do. FIL was the head of the family, adored, a good man, complete flirt and lovable rogue of course. I knew I wouldn't be believed or it'd somehow backfire. I couldn't see how to do it.
I confided in a family friend who knew all of us but who I trusted implicitly. She admitted that FIL had made a pass at her 20yrs ago and she'd never been alone with him again and had cried about it a lot over the years. The very same week, DD confided in me that Grandad kept making comments about her growing up, her teen body, had tried to tickle her. He'd asked her if she'd had any sexual experiences yet.
I haven't seen FIL since, apart from at a family wedding. DD has possibly seen him twice I think at big family events when I've been "working". DH knows and kept DD by his side. She never visits then alone. DH is supportive. He says he follows my lead in this and that if we make a stand, we do it together.
But MIL and FIL are in their late 60s, MIL is dependent on him. She's jealous and protective and prone to defending him even in unrelated situations. I've realised it's because, on some level, she knows. DH remembers vague situations as a child where she was "jealous" and "accusatory" and I think she knew. Knows. She must, right?
I apologise for unpacking it on here. But I thought I'd try and show you the parallels. I know how hard it is. If it were only my relationship at stake, it'd be simple. But it isn't. And it's suffocating and anger making. Because as a woman, a mother, how dare we be put in this situation? How dare a man in a position of trust, abuse it? And fuck me, but do you feel weak for standing by and acting in a cowardly way. Because that's how it feels. You wouldn't ever have accepted it from somebody else. You wouldn't have been scared of the fall out. It makes me sick. I could cry sometimes. Because I can see in my head what would happen. Me, the joyless feminist and DD, the awkward teen. FIL, the lovable rogue who meant no harm. Except he's a lech, a misogynist, entitled, disgusting. Yeah, I know where it would all lead. There is no solution.
So we stay away and we live our lives and I support DH who never even questioned me for a second and has supported whatever I want to do. And what I can do is make the best of my life and protect the people who I love. DH sees his parents lots. I meet MIL for coffee. Sometimes I think she knows why I've pulled away. I phone. I text. I see my BILs and SILs. I've just drawn careful lines.
You are strong and navigating through this in the way that is right for you. Don't second guess yourself. Counselling will help and I hope it comes round quickly or you find a private option. I'm sorry it's so hard for you. You are doing a good job.