You were a bit harsh, but there are actually some legitimate points all around. Indie should be able to feel comfortable at the grandmothers' house, so your sister is right on that front, and it is indeed weird that the memorial has been kept, in public, for so long. However, it's their house, they have a right to keep it up if they want, and their right that your sister should have thought of this when she named her daughter Indie.

I don't know if I'd call anyone TAH in this situation, although your sister's decision to both use Indie's name and subsequent indignation that people would still prioritize the memory of the Indie that came before her is certainly borderline.