My grandson, now 5, has a pretty small appetite, which worried his parents enough that they followed him around after dinner poking more bites of food into his mouth. He now eats by himself, but VERY slowly. They are experimenting with leaving his eating up to him. But on the subject of sitting at the table, there are a lot of squirrely toddlers who CAN'T sit still for more than a few minutes, so keeping them at the table simply becomes an exercise in frustrated and distracted energy, but not necessarily eating.
Allowing younger children to "graze" during the day is sometimes a great strategy for getting enough nutritious food into those growing bodies. Without access to snacks (VERY healthy slices of veggies and fruit, bites of egg or whole-grain toast with peanut butter, etc.), my grandson would get low blood sugar and get really cranky. But he did not know he was hungry.
I'm the same way. My mom still complains that as a young child I'd spend an hour or more at the table cleaning up the food she dished out. I just remember hating mealtimes. And today, still I have to plan to eat at certain times, and I feel better afterward, but I have only seldom in my adult life experienced actual hunger, even now that I have developed diabetes (in fact, I have a doc who is convinced that this sketchy relationship with hunger can be a marker for future diabetes).
So I hope you won't be to quick to judge the strategies your sister has adopted to get enough food into her son. She'll be able to count on him to do more self-feeding as he gets older. As Riley observes, kids who can't sit still at the table as toddlers can and do learn good table manners when they're mature enough.
The rest of the parenting sounds pretty permissive, though. There's a huge difference between "authoritarian," "authoritative," and "permissive or lenient" parenting. Kids in the "authoritative" group tend to do the best with all sorts of life experiences, be the most academically successful, be less likely to experiment with drugs, etc, than either of the other two groups. Here's one of many good links explaining these terms: http://www.familyresource.com/parenting/parent-education/... .