All perfect praise be to Allah, The Lord of the Worlds. I testify that there is none worthy of worship except Allah, and that Muhammad is His slave and Messenger.
For your first question, please refer to Fataawa 84101 and 85477.
You are not a Mahram for your wife's sister. Therefore, she is not permitted to uncover her face or palms of her hands in front of you. Also, it is not permissible for you to be in seclusion with her. If you abide by the above rulings and keep away from the prohibition, then it is permissible for her to live with your family.
If she is in need and you can spend on her, then you are recommended to be kind with her, and you should fulfill her necessities. Allah will never destroy your good deeds.
Allah knows best.