A.,
I don't think you are crazy. I think that you need to protect yourself (and baby) and little daughter. Yes, she and your husband may have already been exposed, but that doesn't mean you should subject you or anyone else in your family to more germs if you can help it.
Let's be honest - none of us want to be germaphobes. But this is said to be one of the worst flu seasons yet. I think it's easy for people who DON'T have infants or small children to say we're being paranoid. Well, I'd rather be paranoid at this point, than grieving the loss of a child due to something that is SOMEHOW preventable.
I'm with you. At risk of annoying your family, I would opt to stay home. I would also have a serious talk with your husband about supporting your decision and HIM staying home too.
From what I understand, you can't tell if it's H1N1 unless your niece gets tested while she's sick. If your SIL is rude or ignorant enough to bring a sick child to a family gathering because it's "a holiday", then you should stay away. Also, be careful about having other family members over to your house (or visiting with them) after they've been around your sick niece.
We have had to become very cautious in our house - insisting everyone entering washes hands or uses hand sanitizer. We have a newborn and I don't care who gets upset with our expectations in our own home. Like you said, sick people need to stay away from your home too because just breathing illness onto you can get you sick.
Good luck.