My brother is a true narcissist and sociopath. He can destroy someone, humiliate someone, belittle someone to the point where they are sobbing. He can falsely accuse someone, he blatantly states things that are hurtful and false. He brags about himself. He is verbally abusive and emotionally cruel.
However, it doesn't faze him in the least. He doesn't bat an eye. He shrugs his shoulders and nonchalantly says "it's not my problem if they're [weak, ugly, wrong, stupid - whatever he has declared them to be]". I know first-hand that he said that someone was dead to him. The person confronted him, hoping to restore the relationship. My brother said, in a casual tone "I didn't say you were dead to me. I said you were 'AS GOOD AS' dead to me. See? There's your problem. You don't listen." Yes, that's exactly what he said, and then he turned away and went about his business, whistling a little tune, while the other person sat there in stunned silence, with tears streaming down his face.
It sounds to me like your daughter has not developed empathy. Perhaps you and she could volunteer at an animal shelter, or work at a soup kitchen. Perhaps you could try completely ignoring her when she makes ridiculous demands, but respond to her with kindness when she is acting in an appropriate way.
And, you may need to be blunt. Stop referring to or comparing to your husband's sister, or your friend whom everyone likes. My daughter has a lot of social anxiety and due to her illnesses, she has been very reclusive and excluded. One way that she asserts control over her life, which admittedly is very difficult, is to insist on certain things to an extremely annoying level. For example, our car is fairly new. If you shut the engine off, and remove the keys, the headlights go off automatically, thus preventing the battery from draining because you forgot to turn the headlights off. When my husband drives the car, he uses this function. When I drive the car, I just turn the headlights off manually out of habit. When my husband gets out of the car with the lights in the on position, even though they are off, my daughter cannot stand it. She gets so anxious, she yells at my husband. She cries. It bothers her so much that the headlight switch was pointing to "on" even though they were off technically. We finally sat her down and told her that she was being controlling. We told her that the headlight thing was not a problem, as if it would be if my husband was, say, drinking too much, or speeding. We told her point-blank that if her preference was to turn off the headlights, then go for it. Be she was NOT to angrily or meanly confront someone over a perfectly acceptable choice that happened to differ from her point of view. We did not compare her to my brother. We called her on a nasty reaction that was really ruining every time we shut the car off. And we told her that she needed to ask herself certain questions before expressing an opinion. Things like "is this crucial, like mom forgot to turn the iron off or the oven off?" "Is this important to everyone, or just to me?" "Is this going to make the other person feel better for having talked to me, or are they going to feel badly?" "How can I help this person feel comforted?" We literally gave her some questions to ask herself before speaking.
I know it's very frustrating. I encourage you to help your daughter learn empathy, and kindness. Demonstrate it. Help her practice it. Help her learn the skill. Attack it as though it's a trait she needs to develop, not a negative thing that she's inherited. My daughter's therapist said not to talk about breaking a habit. For example, if you want to quit smoking. He said not to say "I'm going to quit smoking". He said instead to choose your new attitude or habit and tell yourself you're going to nurture that. For example "Today I am going to start helping my lungs heal". "Today my clothes will smell fresh". "Today I will save the money I usually spend on cigarettes and buy myself a manicure or donate the money to the homeless or save the money in a savings account". Help your daughter say "today I will make one person smile because I said something nice to them".