D.K.
** I have to disagree with Kate P, on her take it may be a problem for your children! How dare she accuse your sister in law of ABANDONING her child! Wow she must be so lucky to have oodles of money and never have to worry about working! Some people especially moms HAVE NO CHOICE or has she never watched the news! She obviously has never done this and maybe is in such great financial standing she has nothing to worry about in this economy. However I do it and have for several years. It takes nothing away from your own children! It adds income to your family without you having to go to work outside of your home and your children be in daycare. I suggest unless she has some proof or experience she shouldn't give out advice like that. My children have benefitted greatly with the socialization and learning to share and also it will help your son get adjusted to sharing your attention when the new baby comes! Please take heed with people who have reasonable advice based on experience.
I do home child care and have since my son was 2, he is now 4 1/2 and I will have to go back to fulltime employment next year. It has been a blessing to have been home and finding the great families I have to work with.
I can say that from a standpoint of it being a family member, sit down and discuss ALL concerns, even get it down on paper so there is no confusion.
You need to establish your rules are yours, though with a baby that is not an issue. Most 3 mos old sleep A LOT, so it is mainly making sure he is happy, clean, well fed and gets her naps with lot's of love and snuggles.
Get their schedule for naps, meals in sync so it isn't really a big added stress. If the baby sleeps at a particular time in the afternoon, put your son down at that same time. Then you get a few hours to regroup and clean up.
I would tell them you want to get pregnant and if you do that you will need time off, they should totally understand that. Since it hasn't happened yet, just make sure they are aware when it does.
Voice your concerns as you have here on this site to them.
When I first starting doing this I had a kindergartener, watched an 18 mos old, my two year old and another three year old part time. It works fine, it is great for your child to learn to share "you" (great prepping for a new baby) then to learn sharing toys and just interacting as his cousin gets older. I can say my doing it allowed my son to really grow in a peer situation big time.
It is good money, if you are good with kids then to be honest I think you are over thinking it.
It is a committment, it is you really looking after another child as if he were your own. That is a must. I remind myself daily how I would want my son or daughter treated at some care givers home. I keep things structured so everyone has the expectations of what is going to happen. They know my house rules and I reviewed all of that the parents beforehand, even about how I do time outs.
If you can do that and talk to your brother about any concerns, schedules, expectations then I see no problem.