Isn't this, ultimately, up to the girl? While you can exert a little pressure on the situation, you pretty much have to wait for her to make her choices.
Way back, pre-QW, I dated a girl who was beautiful, intelligent, funny, and also seeing another guy. He was the "bad boy" type, I was the "nice guy." She and I drifted apart. Our energy levels didn't quite match, and he was more "fun."
A while later, I was contacted by her best friend. He wasn't treating her the way she deserved, in the friend's opinion, and I would be so much better for her. I still held some affection, and found myself in the same sort of situation that you describe. I had to decide whether to jump in with both feet, get mixed up in the drama and conflict, or try a more subtle approach. I chose subtle. I ended up making contact, asking her if she's like to get together in a low pressure environment. I put the ball in her court and waited.
She never came around. She eventually married the guy. I ran into her several years later, by mere chance. We had a short conversation, and she claimed that she was "happy," but I came away unconvinced. I still wish her well.
You say that you try to avoid conflict. This situation has the potential to be highly confrontational. Be very careful. Back in high school, I had a date's ex-boyfriend stalking us with a car full of guys from the school football team. I was a marked man, and spent several weeks living in sheer terror. Please don't walk yourself into a similar situation.
Make your case to the young lady, but I'd advise against being too aggressive. Whatever attracted her to this guy has still got some hold on her. Until she works past those feelings, she can't move on.
As for your bass playing friend, don't let him off the hook. He set events in motion that he needs to be responsible for. If his sister-in-law decides to make a move in your direction, he has to be actively supportive, and, push comes to shove, he has to have your back, emotionally and physically, if it comes to that.
Good luck, and keep rockin'
