Prenatal vitamins work better when taken with food. I used to hate them too, but baby needs them...
It sounds like the doctor is concerned, too. However, at this point, she is creating her own problems. It sounds like this is an issue she really needs counseling on--her self-image and self-esteem. We should strive to be healthy, but gaining a reasonable amount of weight when pregnant shouldn't send our self-esteem crashing unless this was already a problem.
I don't know what to say, other than it sounds like your sister is a pretty fragile person on the inside. Is she ambivalent about having a child? Fearing motherhood? Medical intervention will help the baby, but having a mom who is at loose ends is something else entirely. My guess is that you could call her doctor and express your concern--without expecting him to comment, of course-- and then, be available with resources. If she's frightened of becoming a parent, having the number to a postpartum hotline can help.
I don't know what else to offer you, other than my suggestion that she needs counseling. And if this is eating you up, then you too should find someone who can support you. It's difficult to watch relatives be careless with their children, either in utero or after they are born. I have had to do this myself--one of my siblings was using drugs while pregnant and the baby was born early with birth defects and died a week later. I have found that working out my feelings, accepting that I had NO control over the actions of others, and figuring out how to forgive them and let them deal with the consequences of their actions-- a counselor was helpful. So, I can't help you 'understand'--because I don't understand myself, really-- but what I have suggested can really help.