My Nephew Keeps Biting My Boys

It's easy to see why you are concerned! Your sister-in-law definitely needs to be more proactive about this, especially since it's happened several times. Let her know that children can actually get kicked out of daycare for repeated biting. Some biting victims even have to get tetanus shots, if they're not up to date!
If she is looking for ideas to stop the biting, it's likely that the 2 year old is having trouble expressing frustration, or looking for attention. So teaching her to vocally express her frustration (even yelling, "NO!" is better than biting) may help. If it seems to be an attention thing, removing all attention (even negative, if necessary) after each bite may help.
Remind your sister-in-law that dealing with the issue may take some work now, but it will pay off in a healthier, better-adjusted kid.

If the tables were turned, and it was your boys biting your nephew, what would you want your sister in law to say to you? My son was bit a few times at day care and then started to bite himself; what I learned was that biting, although it seems so much more extreme, is really no different that hitting or kicking. The child does not understand how express frustration. Dealing with it using times outs typically is best. Talking the child through how to express frustration after a time out is also good. If I were you, I would tell her what your son said about not wanting to play again, that you are concerned that it is happening more often, and that while it seem like it is not a big deal to your sister in law it is for you and your kids and you think it best to keep the kids apart until this phase is over. She might feel really embarrassed when it happens, and freeze up in front of you - so she does nothing, rather than correct the behavior. Good luck talking to her!

Biting at 2 is a normal thing - he doesn't know how to express his frustration, and biting gets results. That said, it's not okay, not something that you want to put up with, for a lot of reasons.

I would tell your sister-in-law that you are concerned for your children because of the biting. She may not know how serious it is, or she may not know how to deal with it. (There has been an idea lately that saying "oh that's not nice" is discipline). Ask her if she would take some suggestions on how to deal with the biting. If she won't, let her know you are there if she wants help, but that you won't be playing there for a little while.
If she is open to advice, I would suggest a no-tolerance policy. At 2, his reasoning isn't developed enough to think "that makes him hurt, which is sad, and I shouldn't bite." He just sees the direct result (this is why biting a biter doesn't work - he knows it hurst him but doesn't understand that it's the same for others). Instead, any time he bites, it is automatic time out/isolation. As soon as he bites, so "No biting" and put him in time out. No more conversation, no trying to get him to understand another point of view or how the other child feels (he can't). Just "no biting" and put him in time out. It should be no longer than 2 minutes, and it's okay, at least at first, if he screams the whole time. The point is for him to see that biting won't get him what he wants - it'll get him in time out.
oh- and that means a grown-up needs to be supervising their play all the time so that he is always caught in the act (it's a good idea anyway, at their ages, to have an adult right close).

Hi A.! Just tell your sister in law that you are going to wait until the biting phase is over before you come over again. I am going through something similar now with my sister's 5 year old son. She is crabby about it but I refuse to put my kids in a situation where they will be harmed.

You need to tell her that you found the bruise and bite marks on your son's butt. This is serious and she won't take it seriously until there are consequences.

However you choose to deal with it, I think you should honor your child's wishes to not play with your nephew anymore.

EDIT!!! oops! Instead of saying "anymore" I meant to say that your son shouldn't have to play with your nephew for AWHILE Sorry about that! ;)

A.,
This might be a little harsh, but tell her you're going to bite her next time her boy bites one of your kids! My sister in law finally broke down and bit one of her nephews because he kept biting and he doesn't bite anymore. Sometimes you have to take disciplining others children into your own hands when it is family. Doesn't sound very fun, but if you want them to keep playing you will have to have a serious talk with her. Try to be nice, but YOUR children are getting HURT. Bring out the mama bear if you have to!! ;)

V.