I think you have gotten some really great advice from alot of different view points.
I completely understand how hard this is emotionally on you.

This in not the way we want our lives to turn out. All you want is the best for everyone. But you can' t do anything to make it right...they have to do it themselves.
Your sister is a grown adult and needs to grow up! There is NOTHING you can do to fix this for her. This is her issue. Truely, you are not helping her if you do 'anything' for her. She expects it! Do not help her in any way. No more money, no more carpool, no more job leads.
Your parents are choosing to live this way...probably out of quilt. This is going to be bad for all involved! You sister will never get on her own two feet, if everything is being done for her.
You need to remember that they are choosing to be this way. Your sister could not be taking advantage of them with their permission! You need to understand it has nothing to do with you...they feel bad that your sister has messed up her life.
Your parents might never be the kind of 'grandparents' to you children that you 'dream' of. Because they are to busy being the 'parent' to our DN. You need to allow your children and your parent the to opportunity to create a relationship on their own. One that is not based on just 'caring' for them. I would talk with you mom and ask her what kind of grandma she want to be? You might be surprised by the answer.
You need to take your children out of your mothers care. It is not worth it! It is emotionally...to expensive for every one. She needs to be the grandma again!
I know you probably feel very sorry for you DN

. I think you truely want the best for her.

But, I think you are going about it in the wrong way. I think, you have gotten to involved in her day to day life. That is your sister's job & now grandmas too. Even if they are not doing it the way you would like, it is there job to do.
I would ask yourself if this is the kind of aunt you want to be? If not find a way to do it differently. I would probably want to be the fun aunt! The person that comes over once a week or once a month and takes her out to do something really fun.
I would go over and pick her up and spend time with her "alone". Or maybe just spend an hout playing her new video game. I would also include her in 'my family' sometimes (maybe once a month) ...if everyone can get along.

Maybe a friday night movie or game night. I would want her to know that I am always there... no matter what!

mYou can't be that kind aunt... if you are playing the parent role.
What was your relationship with your sister like growing up? Do you have any kind of a relationship with your sister now?
I know how hard this is to go through.

It took me many years, before I figured out that I need to make some changes, for me to be happy!