J.,
I had a similiar situation with my sister-in-law. She had the straps on the seatbelt waaaaay too loose. The poor child could have just fallen out of the carseat and my brother-in-law drives very fast and crazy.
I finally had to ask myself how I would feel if something happened to the baby and I hadn't said anything. I love my sister-in-law dearly but she is sometimes hard to approach with sensitive issues.
Well, I had a great opportunity when she asked me to buckle the baby into the seat (infant seat) so I took the time to tighten the straps properly. Then when she came back in the room I casually told her the straps were a little loose and I tightened them. Then I went on to say how important it was that there is only a finger width at the shoulders. I included her as if she already knew this information and how we both knew it was really important. This seemed to work.
If this approach hadn't have worked I would have talked to her about it more directly. It's really upsetting to see people take unnecessary risks with their childrens lives. I know they love them and would hate for something to happen to them. But, maybe it takes people like you to speak up.
Remember, if it protects yours niece or nephew don't worry about it if she gets mad for a little while. Explain to her that you have her childs best interest at heart. Good luck!