I think as far as what any of your other family members think... who cares?!?!?! You are the ones that have changed your own lives completely by doing this amazing and wonderful thing by taking in your sister's children. You said yourself that they haven't helped you out one little bit, therefore they get ZERO say in what you should do. You and your DH have to ultimately do what's best for you and your family. IMO, the fact that their educations would be taken care of sounds wonderful, but I wouldn't like all of the government intrusions, either... so it's a tough call. As far as your sister is concerned, if I were you, I would NEVER let her have those children back. She has made her bed and now she should lie in it. I know that sounds harsh, but it's always the children that suffer from going back and forth between caregivers. It sounds to me like they are just fine with you... more than that... good luck on deciding what to do!
We've gone through this cycle a time or two with my oldest sister. If the kids are happy and situated, and the Youth services is in agreement, then I'd say go for it and finalize it. The best thing for them is knowing where they're going to be in the future. We've almost gotten there twice, and each time it's been hard for my niece R. when there isn't a definite answer.
My parents had had custody of R. for most of her life. A few years ago we took custody of R. (at her request, she adores her cousins and likes to be a "big sis") for a time thinking it would be permanent, until my sister finally took some of the steps and eventually regained partial custody. We're still somewhat on edge though because some of the previous issues don't appear to have changed as much as anyone would like, and to take her back out of R's life would be hard for her especially because she's a lot older now, and knows exactly what's going on.
In the end it's always going to be hard when family is involved. You can't think rationally about your own children.