My sister in law doesn't mind being naked with me!
I guess we were both a little curious, and stayed naked together for an extra few seconds.
If you're uncomfortable with it or find yourself being attracted to her, then I would ask her to wear a bra, shirt, and pants at all times until she went to bed.
I am not quite sure how, but I entered the family changing area, and my sister followed with the girls.
Our son is now 6 years old and my daughter is 3.
She's causing sexual tension, and she needs to stop the full frontal encounters.
We had a good time talking, nothing sexual of course.