I think abletosplash that if your sister is suffering with the memories of her childhood, then perhaps she should 'take a break' and possibly consider counselling too, it might help.
You seem to say that your Mum is a good GM, and has been helpful, so it's not like she seems to be as evil and wicked as some of mothers described here.
As her sister, the best thing you can do is to support her decision if that's the one she needs to take. If you are happy to continue contact with your mum, absolutely continue.
My mum cut contact with her mother, because she was not well treated as a child, and was 'the middle one'. She grew up watching her brother and her baby sister be doted upon, while she was subjected to different rules entirely.
So on the day of her marriage, she said Enough was Enough and didn't have any contact with her parents, nor her sister and her family.
27 years later, they met up. I only met my GM when I was 23. She was just an old lady to me, not my Grandmother, and she never really will be.
I feel badly somehow that we are not closer. She is a GGM to my son, and we all know how rare GGMs are.. so really special. I always go to 'do's she'll be at, and have seen my mums sister and her family a few times. I like them very much.
My mum knows now that the decision she made (at 21yo) was flawed. That she denied her DC the chance of knowing their only grandfather, he died when I was in my teens, I never met him. She realises that the actions she took had deep and far reaching consequences, and that had she known, she wouldn't have cut off contact.
So, the point of this tome of a post is to suggest that if you know that the DC will be safe, to perhaps encourage your sister to still allow contact with their GM, but by all means for her to take a break from seeing your mum, if that's what she needs to do.
Apologies, that seems ridiculously long...