It's natural for you to be on the defense...I completely understand. Also the trust issue is going to take some time...for sure. But it can happen, if she is willing to put in the work to make it happen.
As far as the HWH...and not seeing the kids, I believe many of them have set visiting days/hours. She should still be able to be with her children...at the specific visiting hours.
I hope she is not pleading her case to keep from going to the HWH. I hear you that her sister's house may be a positive environment, but it probably does not offer the kind of structure she will require in order to get her life back on track...and ultimately your marriage and family life.
But, I'm no expert and I do not know your wife or her sister. I do know many addicts though (too many) and I have not met ONE who went home after rehab and successfully remained clean after leaving.
Think long and hard my friend...her life (and your family's) is at stake. I wish you all the best.