With my first child, my sister, Mom and MIL (with Hubby's help), arranged for a shower at our house. They had portions of it catered. There were decorations, games and a huge cake and everything else that goes with a true shower event. We registered and did the whole nine-yards for that baby.
Then Hubby and I hosted a "shower" for ourselves for our second child. It was less of a shower as there was no expectation of gifts but rather a celebration of life, family and friends and the invite was worded as such - a time to celebrate life. It was during the summer and everyone went swimming and what-not. We grilled and had a blast visiting with everyone! We did not register or anything since this was not a true "shower" but we did receive a few gifts and some folks gave us cards with gift certificates/gift cards. These were more helpful than any actual gift would have been anyway since we could put them to use as we needed them. Again, I need to stress that there was no expectation of gifts and this was a celebration of a new life, not a "shower".
Now we are pregnant with our third who is due in a few weeks. With the expectation of poor weather conditions (which the NE has more than delivered) and having just come off the Holidays, we are foregoing a celebration for this Baby. We talked about hosting another get-together but agreed that the timing was difficult for us as well as everyone we would want to invite.
I do not think this is a matter of being rude or tacky; maybe this is just a desire to celebrate the joy that is coming into their lives with those they care about. Your presence and a thoughtful card would be appreciated but IMO an actual gift is optional. Also, something to keep in mind is the age difference - 5 years may mean that unless they were planning on a bigger family, a lot of the "baby" stuff is now gone. Certain items just don't keep anyway - ever put away a white onsie only to pull it out with a big yellow stain on it??
If you are that uncomfortable about the situation talk to your sibling (her parent) and express your concerns to them as approaching your preggo neice may not be the best course of action. Honestly, I would not make a huge deal about this and just do as much as you are comfortable with. I would definately attend though as you'll be missing out on a great time with family. Good luck with your decision.
~C.