Just wanted to let you know you're not alone! My son has always preferred my mother over me. It used to really bother me, especially since his behavior would become awful when he was around her! Seriously, his behavior would worsen around her, and he was almost impossible to discipline with positive results when she was around! It drove me nuts!
It's gotten much better the older he's gotten (and I never limited time with her for him). She lives almost 2 hours away, but still sees our kids (we have two children now, and this has never been a problem with my youngest, a girl) quite often. We talked about it, and she tried to make some changes (in terms of disciplining him just like I would, etc.). He's 3 1/2 now, and although he still loves her, we don't tend to have the same problems arise as before (behavior, him preferring her over me to the extent of hurting my feelings, etc.). They are very close (and I love that), but the situation has lessened over time. ;)
It's funny. We're going through this with my son at preschool right now. He only goes part-time, two days a week (and just started last week). He cries when I come to pick him up ... he wants to stay with his teacher and at school! It makes me feel awful (and kind of hurts my feelings), as he and I are very close and have a great relationship, and he's my little guy at home! I'm sure this, too, shall pass for us! ;)
You might want to have a frank discussion with your SIL about how you're feeling, what you can both do to maybe help, and then you might just want to hang back and let it play out a bit, too. I really do think it will get better over time! Good luck!