Sorry to hear that saggyjuju, she sounds similar to mine though mine mostly ignores me, which I suppose is easier in a way. Sorry to hear about her attitude to your DD. That's bloody awful! Your sister sounds a lot more toxic than mine....
The thing that pisses me off most about my sister is that no one confronts her about her thoughtless behaviour (which is also directed at my brother and mum) as, for some unknown reason, people are scared of upsetting her.
I'm pretty single-minded and focused I suppose so I get really frustrated when I hear her moaning abut having no money, a crap job, etc. She won't apply for tax credits or any other benefits even though she is certainly entitled to them as she 'can't be bothered to fill out the form'. My mum even got her the forms and offered to fill them in for her, but she still refused. She won't put herself on the council tax list as 'the list is too long' - yes, but you won't get a house at all of you're not on the list. She says she's 'too proud' to claim benefits, but meanwhile taps mum and dad for money as her and her partner have been hit hard by the credit crunch and are short at the moment. I am of the opinion that if you're entitled to benefits, then you should bloody well get them. Mum and dad aren't made of money, but they try to help out where they can. She emotionally blackmails them a lot and mum ends up caving in as she doesn't want my sister's DD to suffer.
She resents the fact that my brother and I went to uni and got good degrees, even though mum and dad made it clear that the money and support was there for her to go. She has a HUGE chip on her shoulder about it and moans that she is stuck in a shit job as all the graduates come and get the good ones. Mum and dad have told her that the money will always be there if she wants to go (no pressure at all, just letting her know). She says she 'can't be bothered'. Fair enough, not sure I could be bothered if I hadn't done it at 18, but STOP BLOODY MOANING ABOUT IT THEN!
When my brother lost his job as a result of the credit crunch, she gloated about how his degree hadn't helped him out. She was put out that he found another, better job within 6 weeks.
She's done a couple of really shitty things to me in the past, although mostly she is just completely thoughtless. She was a moody cow to me on my wedding day (I'd stupidly made her one of my two bridesmaids) and bitched and moaned all day - even on the wedding video about how I was selfish and hadn't said 'happy birthday' to someone on the day(I'd forgotten - it was my wedding day I had other things on my mind, the girl in question didn't even mind). I gave my sister her present and she snorted and walked off. AAAGH!
I used to get quite sad that I had a crap relationship with her and tried to talk to her about it once. She said she wasn't that fussed that we didn't get on, that this was the way it is.
Since then I've had to emotionally distance myself from her. I feel so much better. She is just one of those people who I wouldn't be friends with if we weren't related.
I just wish my mum would tell her how she feels as she really upsets my mum and she just takes it.
I recommend trying to separate yourself off in your mind. It's done wonders for me. Now I just smile and nod and let it all wash over me. It is easier said than done though and has taken a year or two to get my head around.