Dear S.,
It seems to me like you've got three situations in one.
First, you've got this crazy soap opera of a blended family -- your MIL from your husband's side hooking up with your SIL from the other side of the family. If you had to draw your family tree, that WOULD look complicated, and it does sound like there's been betrayals and hurt feelings on both sides, but none of that should affect your daughter. All she needs to know is that so-and-so lives with so-and-so.
Second, your MIL has a lot of adoptive special-needs children. In most cases, that sounds wonderful for your daughter. It will teach her understanding and compassion beyond her years. In a few cases, you might have reasons for concern, especially if some of these special needs kids are teenage boys, since there are cases where developmentally delayed boys have hormones appropriate to their biological age but don't have the cognitive ability to set appropriate boundaries. I recommend that you evaluate the situation with these adoptive kids separately from everything else. If you don't have reason to be concerned about your daughter's safety, consider it a blessing. She will be wiser and kinder for it.
Third, and completely separately, there's a same-sex relationship going on. My personal belief is, so what? What matters is if people love each other and are able to establish a happy, stable, functioning household. I do realize there were hurt feelings and betrayals in this situation, and I don't condone that, but the sad fact in our society is that a lot of LGBT people try to deny their sexuality for years, and the result is that the people with whom they "live a lie" get hurt. I don't mean to minimize your FIL's and brother's experiences, but I think it's possible (and actually really necessary) to have compassion for everyone involved.
Finally, I really, strongly recommend letting it go. You're eventually going to need to accept that you can't control the actions of other people, but you can be a role model for your daughter in accepting those actions with grace. If it's hard to accept that you don't have a "Leave It to Beaver" family, try seeing a therapist or a family counselor to talk your feelings through. In the long run, you might find that having a (queer) Brady Bunch family isn't that bad.
Lest you think I'm preaching, I speak from experience, though not quite as dramatic as yours. My father carried on a clandestine relationship with my babysitter for much of my childhood, eventually moved in with her, and then spent my teenage years taking my mom to court for custody of my brother and me. One of the happiest, most liberating experiences of my life came in college, when I realized I didn't need to live my life in the undertow of a turbulent family; I could just love my family (at least my mom's side of it) and get on with my life. I hope you discover the same.