We have had christenings and have god parents for our children. However we have made a will that nominates who will take our children in the event of both our deaths. Our will details who would have custody of them and how our estate can be spent for their benefit. The executor of that is a person who wasn’t even at the christenings. We organised this with the full agreement of all involved and it was drawn up after their christenings.
If you are not religious and do not agree with the ceremony then you should not take part (if you are not comfortable with it, I don’t mean you should be barred!

) . You are the child’s aunt and will always be their blood relative. This holds far more sway than any sacrament in a church. As a pp stated, at the ceremony, a god parent only agrees to take on their spiritual well-being.
If your family want you to take on their child’s physical well-being in the event of their death then this is a legal issue and has nothing to do with a day out in a church. You should talk to them to clarify what they imagine your role to be in this child’s life.
As a last point, a relationship with a child is built through time spent together and love. The people my children love are those that spend time making them laugh, listening to them and caring about them. Titles such as godmother etc mean nothing to the actual child. So don’t let the issues with your sister in law stop you from building that bond with your relation.