C.M.
One thing I have noticed is that some people are really weird about food allergies. My daughter recently developed a reaction to some foods and some of our family members actually DENY that it could be true. She gets terrible migraines. Her grandma insists that it "can't be true" because she "used to eat that food." Well, things change!
Another one of my friends has a son who had a reaction to peanut butter. She actually got depressed over it and wouldn't talk about it. She acted like he was diagnosed with a terminal illness and had a lot of trouble coming to terms with the fact that she'd have to change everything about her cooking and house to deal with it.
It's hard, I know.
I'm surprised the doctor wasn't more concerned about the reaction to peanut butter. My friend's baby had that same reaction to peanut butter and he was fine after Benedryl, BUT the doctor warned that each subsequent reaction could be more and more deadly so they had to completely avoid peanuts and she has to carry an epi pen. All he got was a rash around the mouth after eating a peanut butter sandwich.
The RAST test is often inaccurate and a score of 1 is not that dangerous. I'm surprised that the doctor did not advise the skin test after peanuts showed up on the RAST. BUT, I'm wondering if your sister either downplayed the peanut butter reaction or failed to mention it to the doctor. The reason I say this is peanuts are a 1 on my RAST test, but I've never had a reaction to peanuts so the doctor was not worried about it. I eat peanut butter and such things and I have no allergic reaction. BUT my friend's baby had the rash around the mouth after eating the peanuts and it showed up on the RAST test (I don't know what the score was) but because he had the rash after eating it he had to have the skin test. That showed up very positive right away.
Since your sister insists that her child is only allergic to milk, I would bet you a lot of money that she told the doctor that she only had a reaction after eating Mac and Cheese and didn't mention the peanuts.
I wouldn't back off. Your niece could possibly have a life-threatening reaction to peanuts. What's the harm in making your sister upset if it saves your niece's life? I'd rather have an upset sibling and a LIVE niece! Besides, her being upset at YOU is nothing to what she's going to feel if she has to rush her daughter to the hospital because she can't breathe! With peanuts, it can be a matter of MINUTES before asphyxiation.
Good luck!