Tom-- Just don't get mad at the sister if she doesn't leave and/or takes him back. Most people take quite a few practice runs to leave a jerk like that. Always have your door open, always let her know she can rely on you for somewhere to stay and for financial help leaving. These kinds of situations have their own timetables and though it's easy to look at it from the outside and see that she should leave him it's not as emotionally easy for some people to do it.
I just wanted to second this advice. I'm dealing with something similar, not as bad, thank goodness. It's really stressful to confide in anyone because I am always worried that they'll see me as weak or get mad at me for not getting out sooner. Or not standing up for myself. There's a strong sense of "Well, you're the one staying in that situation so you're not going to get support if you choose to remain there." I'm not talking about abuse or cheating mind you, but things aren't great.
Anyway, one of the best things is that everyone in my life is supportive of me and isn't just trash-talking my relationship or making me feel stupid. Sometimes you just want to know that people support you even if they don't agree with you.
As far as abusive relationships go, it definitely takes several attempts before someone actually leaves. That's pretty common. I saw it a lot when I was at the DV shelter and it's a decision they need to come to on their own.
I don't know if there's abuse going on here, but it sounds like emotional abuse at least. I wouldn't suggest that you personally get involved, but support your wife. And as a sister, I'd want to try to remind my sister of her positive qualities and serve as a counterforce to all the negativity she's probably hearing. Nothing over the top, just enough to give her some perspective and realize that his opinion of her isn't the only valid one.
If abuse is suspected, I'd open up a dialogue where she might feel free to confide in me. If she wanted to stay with him, I'd suggest making a safety plan. Also just practical things like keeping an eye on finances and all.
I know it's a difficult situation but you can't force anyone to change.