You don't seem to understand how emotional affairs work.......or else you are in denial. You believe they can show up at the same event and everything will be okay as long as they are not contacting each other in between family events.
If she were an alcoholic, how do you think it would work if she were allowed to drink every time there was a family event? Do you believe she could stay on the wagon?
It's the same with an emotional affair. It is an affair! It is addictive! I don't know anything else to tell you b/c you can't accept the fact that your W cannot continue joining the family events as if there is nothing going on between her and BIL.
The only way I see telling the family might help, is if they agree to not invite the BIL and your W to the events they are hosting. But if they don't understand how EA's are addictive, then they may not cooperate. As for just telling them as a way of shaming the affair partners, I don't see it being very effective. Think it over very carefully before you do it.
Believe me, I know this hurts. I know! It changes everything from the way it once was in your family gatherings. The pain is indescribable. I'm so sorry for you, your sister, and the family. Everyone is affected.
((hugs))
It is not about what you feel should work in your M. It is about doing the work that gets the right results. Do what works!