You just have to tell her, but it’s your decision whether you want to be sincere or demanding in your approach.
I would suggest to her that they hire a sitter to come to the wedding and watch their daughter in another room or bring her back home so that your sister and her husband can have a great time at the reception. Here you’re showing her that you’re thinking of her and not your wedding.
The other option is to be blunt and tell your sister you're planning an adult-only reception and that she must find sitter coverage for her daughter.
Since people are very sensitive when it comes to issues regarding their children I would offer to help find them a sitter if they need assistance or even offer to pay for the coverage if you think money is the deciding factor.