Hey! First, I wanted to say you are a wonderful sister for doing this for your niece and her parents! And HUGE CONGRATULATIONS for your DH's news. I planned a similar trip back in Feb-March with my family of 4, my parents (mom has dementia) and my sister's family of 3. So, not as long a trip and a similar sized group, but with 2xbabies. We did not do
Free dining since our family tends to like TS and we usually only do 2 larger meals plus a snack for the kids. For us, TS is a way to get DD1 (then 4yo) to stop and rest and take a break.
Here's what we did - rented points for a 2BR at BLT. My sister was on the fence about coming for the longest time - we said we would pay for lodging and some meals; I ended up giving them 3-day tickets (and my parents 5-day tickets) for Xmas later that year so they wouldn't feel financial pressure about whether to go to the parks. If they wanted to go extra days, the cost of additional days was much lower. My sister was VERY much a "we don't wanna make plans" person and I was like, "WHAT DO YOU MEAN! YOU HAVE TO PLAN AHEAD FOR DISNEY!" They hadn't even decided whether to come when 180+10 booking opened up. I tried sending emails like the ones you suggested up above, pointing to links about restaurants and attractions, and my sister did the email equivalent of an eyeroll and said, "It's vacation! I don't want to have to plan anything!" Eventually I let it go, too. I knew that with all of them coming from the West Coast, they would not be doing rope drop with anyone. We had been to WDW a few years previously when DD1 was a toddler and they had no kids (and my mom's dementia wasn't so bad). So here's what I did for dining and FP:
at 180+10 - I booked several TS places that I knew our DD would enjoy. If it was lunch or dinner, about half the time I made a big enough reservation that they could join if they wanted to, but included my parents for sure. I booked a couple of breakfasts just my DH and kids because I knew we would be up way early. I also booked more TS meals at GF or the Poly rather than in the parks since my sister only had 3-day tix. I just made sure that before the 24 hour window was up, I'd adjust or cancel the rez if it looked like it wasn't going to work. Since we weren't on the DP, my sister ended up covering a dinner at the Wave on the their last night, and we covered maybe 1-2 dinners that included them. (We paid our parents' way)
For FPs, since we had babies, it was pretty easy - I booked AM FPs for me and DH and DD1, and then linked all our tickets and booked afternoon placeholder FPs for my sister, her partner and my parents, based on what I remember them liking in the past. If they made it, great, if not, no biggie.
How it worked in reality:
My parents came along to whatever meals etc we booked for them, and slept in and spent time with my niece at the condo in the mornings when we were already out at the parks. By around 11am would begin the multitudes of group texts, where are you/we are getting up now/probably leaving the condo in an hour, etc etc. We would usually meet around lunchtime or after, hang out at the park for a while and do some rides together. Then we'd take our kids home for an afternoon break while my parents and my sister hung out at the park. We'd usually regroup in the evening or late afternoon, sometimes going to dinner together, sometimes not. Sometimes they used the FPs I booked for them, sometimes not. We spent a bit if time every day texting to figure out where/when we were going to meet, but it didn't really affect our touring so much since we were already in the parks, and my parents were either with us or with them. My parents got to enjoy dinner at CRT and BOG and Boma and Mickey's Backyard BBQ, and brunch at Tusker House and CP. We did an early breakfast at CRT with just DH and our kids on our first morning - my parents' flight was late the night before, so they slept in, and we got empty Main St pictures. As a big group we had dinner at The Wave and Kona Cafe, can't remember if we did others. DH and I also went out for an adult dinner at California Grill with some friends who happened to be there at the same time.
All in all, I saw a lot of inefficiency with how my sister "toured"

but they were fine with it. I do wish we could have spent more time together doing stuff in the parks, but they were sleeping until 11-12 every day, so that wasn't really going to happen, since our kids needed to be back and in bed by 7/7:30.
As with your brother, my sister and her partner have limited means, so I was fine with booking the villa and covering their tickets. What would I have done differently? Maybe planned a few rides or meals around midday or in the afternoon so we could have spent more time together - though that was hard with 2 babies having to nap too. We did spend a bit of time at AK together; since we were so close to MK, we spent most of our time there.
Either way, you are going to have a great time, as long as you channel Elsa and let it go!
Oh, and when you're at WDW with a 3.5 yo - you WILL ride Pooh, Small World and the carousel a bajillion times. Also the parades and characters are a lot of fun. I would suggest getting ear/hearing protection for your niece and also making sure they rent or bring a stroller. MK is LOUD, and you will need them for fireworks and parades and some of the shows.