Number one rule for me has always been, that no dog is safe around children. Every dog has the potential to hurt a child. Most dogs will never hurt a child, but the potential is always there!
If a dog has shown discomfort/fear/aggression toward a child (one of my dogs that we had for 14 years until she had to go to the rainbow bridge) was uncomfortable around babies and toddlers with diapers. She was still a puppy and I could have probably gotten great results with proper training, but that was 22 years ago and I did not know any better. We just conditioned our children to only play with our dog with toys, to now crowd her, to never bother her when she is laying on her bed. I trained the dog to always drop whatever was in her mouth when we reached for it. We made sure to either always give it back right away or to trade it for something she liked. She learned that when she was on her bed, that this was her safe place!!!
When we had guests with babies or small children, we either made her stay on her bed or put her in another room. We had lots of children visit our home, I took care of the neighbourhood children during school breaks and even the whole Summer! Not once did our dog hurt a child, but we were always vigilant and I cautioned everyone who met our dog for the first time, that the dog is a good dog, but not a safe dog!!!
In your case as well, you will never be able to fully relax having your dog around children. You will need to train the children who will have contact with your dog, as well as their parents on how to be around your dog!
Since your dog actually lunged at a child the responsible thing to do in my opinion, would be to get a good trainer involved. Perhaps your dog can be trained to rather take the flight response instead of the fight response when she feels stressed or fearful, and to go to her crate on her own?
Another option if you don't want to keep the dog in another room, or behind a baby gate, is to train your dog to wear a muzzle during your sister's visit. It won't protect the children from getting hurt by your dog, but it will prevent a bite injury!