I understand the trauma that you are going through, but must commend you for handling the situation maturely till now. You have given us a detailed background, which will help us base our solutions on that.
The damage has already been done and any fire fighting exercise that you may now undertake has the potential of flaming the fumes further. It is clear from your passage that you have an inseparable bond with your sister and hats off to you that in spite of your closeness to her, you have never tried to take sexual advantage of her.
I can visualize your deep hatred and contempt for your Step dad. Even the title of your question suggests that your step dad is to blame as he is taking advantage of your sister and not the other way around. This is no time for a moral lecture, but time to see how best you can handle the situation.
Firstly, your sister is an adult and is aware of her responsibilities and the consequences of her actions. As a loving brother, you have already sounded your concerns. Things are not likely to change. Since your Step Dad is relatively young, there is an element of lust in the relationship. You have mentioned that your dear sister, has had innumerable flings and you were fine with that. This however is closer home and affects the people who mean something to you.
By complaining to your mum, how will things change? On the contrary you will alienate your step dad (who means nothing to you), you will antagonize your sister (who means everything to you), and you are not aware of how your mother will react. I say, lie low.
Your sister having sex with her step dad, is not morally the same as would be if she was having sex with her father which then would be incestual and even a crime. This is the time your sister needs your support and much as you hate doing it, just be there, without doing anything that will create a situation. On the one hand you want to protect your sister, but on the other she has implicitly told you that she does not want you to interfere (do not tell mom).
Be prepared for your mother finding out about this affair. Such things never remain a secret for long. It is at that time, that you will need to take a stand – did you know about this affair or didn’t you? If you did, why did you not tell her at that time? I leave that decision to you. Your conscience or your love for your sister?
Your fears about your step father using your sister for immoral reasons are unfounded. Do not think that much ahead. Remember your sister is as much part of this scenario as your step dad. Think of it as sexual lust and let it lie.
While this episode may not have a happy ending, there are some situations in life which are beyond one’s control. All you can do is pray.