I have said a few things, and told one story, but I have not said my opinion on how I would handle it. Here is how I would:
Regardless: I would have a proper ROPS. <-period. I would never loan him anything again. <-period.
If he will pay, I would accept it, and if not, I would pay it and fix the ROPS, and forgive the entire thing.
In my worldview, that ROPS is small potatoes. I would drive it out of my mind, and think...and yes, pray about the larger issue for around three months. And then at the end of that time, I predict (but do not know for sure) I would have a talk with Sister:
"The ROPS is not even a blip on my radar screen. What concerns me is what it taught me about the fellow you are dating.
I wish a kind, honest, moral, thoughtful, and reasonable man for you. If you continue with this fellow, I will do my best to be as friendly and normal as possible at all family gatherings, and regardless, I will always love you.
Please do nothing on my behalf, but look at all available signs, symptoms, and information and do the best you can for yourself and for your future."
After that talk, I would do my best to forget, and be a man of my word to my sister.
As time rolls on, if they marry and you become an uncle, never forsake an opportunity to be their children's favorite uncle. Teach them good lessons for living and keep them close. View it as an opportunity, not an obligation.
It seems like a lot to ask, I know, and I would not find it easy. But if being right were easy, we would all be right all the time, and problems like this would never develop to begin with.