Dear E., You have a lot of courage to undertake so much.
Parenting your adult children is perhaps the biggest challenge we face as parents. What complicates your situation is that your niece, at 17, still needs an active parent, but becoming a parent herself has pushed her prematurely into being considered an adult. I think we have to remember she is not yet an adult, and it sounds as if she needs help making wise choices.
The problem really isn't the aunt's bad influence but your niece's inability to resist temptation and take responsiblity for herself. Limiting your niece's association with her aunt probably won't work. You can't enforce it. You can, however, expect her to return to and maintain the levels of accomplishment she had while her aunt was gone. Without criticizing or running down the aunt, try to show your niece the things that are keeping her from succeeding. Try to find out what motivates her and help her keep her goals in sight. You sound like you could be very inspirational.
As you say, if the long term goals are desired enough, your niece can face this challenge.
About the baby's care, if the child is in an environment that worries you, you must address that.
You sound like a very special lady, dedicated and hard working. Take care of your own health and best wishes.