Professional or work related references?

I'm in the process of applying for positions in a new specialty - Psychiatry. I have some limited experience in the area (as a nurse and in a previous career) but I know this is where I belong.

While the doctors I've previously worked for absolutely support my decision and will say I would make a terrific Psych nurse, I also have a person who is well known as a neuropsychiatrist who has been encouraging me to move in this direction for several years. The hitch? She's my sister-in-law.

I know that you aren't supposed to put family members down as references but does this situation make a difference. Certainly she wouldn't give me a reference if it meant putting her reputation at risk. I don't want to lie and say "colleague" when we haven't actually worked together.

Any thoughts?