Helping My Kids Adjust to Their Half-sister's Gender Change

My 3 kids - girl (4), boy (3), and boy (almost 4 mos.) - have a 19-year-old half-sister from my husband's first marriage who I will call "Laura". Laura lives in NYC, and, except for 1-2 short visits a year, she historically has had little contact with the kids except occasionally by phone, either when their dad is in NYC visiting her, and/or when their dad is with them in IL and on the phone with her. Nevertheless, the kids are very aware of who she is - they have always proudly told people that they have a "big sister Laura".

Last week, Laura was in town from NYC visiting my husband (we are separated), and the two of them had a 6-hour visit with my 2 oldest kids. My kids had eagerly looked forward to the visit with daddy and their big sister. For the past year, however, Laura has begun living, looking, acting and dressing like a man, including adopting a man's name and getting a "buzz" haircut. I hadn't prepared my kids for any of this since my husband and I had agreed in advance that the only thing that he and Laura would tell our kids was that she wanted to be called by a new name. Unfortunately though, Laura apparently explained much more than that to them when their dad stepped away for a moment, including that she is their "sibling" and not their sister anymore, and that the next time she saw them, her voice will be much lower. My daughter, who is almost 5 and very verbal and precocious, came home shocked and confused by it all, while my 3-year-old son seemed relatively unfazed since I think he simply didn't understand any of it. Since then, my daughter has been "acting out" at home and at school and has started crying at times that never used to bother her, such as when I drop her off at ballet class and tell her that I'll be back later to pick her up.

Now that the cat is out of the bag, the question is what to do as far as helping my daughter - and eventually my son - cope with the loss of their "big sister" and all the other changes that go with the gender change, like calling Laura now by "his" new name and referring to Laura (or at least hearing adults, especially their dad, identifying Laura) as their "brother" and with words like "he", "him" and "his". I am most interested in hearing from anyone with clinical training in a situation such as this, or with insight based on their own experience in a similar situation (e.g., perhaps a family member "coming out" as gay). What should I say/do and not say/do?

In case any of this is relevant, I met Laura when she was 12 after dating her dad for several months, since we knew early on that we wanted to get married. From day one, she didn't want to meet me and resented my existence in her dad's life since it had basically been just the two of them until I came along. (Her mom is mentally ill, heavily medicated, and in-and-out of psychiatric wards.) Although she lived with her dad and me for the first year and a half of our marriage - first in NYC and then in Chicago - she moved back to NYC in 2003 to live with her mom when she turned 15 since she basically hated me and her father's new life (we had just had our first child). After she moved back to NYC, things continued to go from bad to worse in what little relationship I had with her, to the point where, for the past year, she and I have had no contact (her choice, not mine). She doesn't try to hide her hate for me, especially now that her father and I are separated. In fact, she sat outside in his car last week while he was picking up our oldest 2 kids and had no interest in coming into the house to see her new baby brother, who she has never met. Before arriving at the house, she expressed to my husband her fear and revulsion at the thought that I might come out and say "hi" to her - which I would have done if she weren't so averse to my doing so.