The entire visit began badly even before the writer arrived at his destination, turned darker when his father gave him information that indicated infidelity behavior by both parents, and then yet another sibling to focus rivalry.
I suppose I would first ask where the writer was when he watched his half-sister in her escapades? If he was personally present I’d have to consider whether watching or participating in this activity was a one-time event or a more common intertainment for either him or his half-sister. Knowing this would allow a more clear picture of the writer and also a more clear picture of his assertion that his half-sister ‘recognized’ him.
Chatting with his wife about the discomfort is a start though. At least he’s begun to share. Eventually though, he may need to recognize that his half-sister may well become a regular in other family happenings and if he’s to survive, he needs to address this entire situation FIRST with her. He could even begin with “You know, I thought I recognized you but I’m not sure and maybe you can help me out here…. were you the person who….. ?”
As far as I can view, the writer can:
distance himself from his family and remain silent—
Share his story with his parents (which could also distance him without his intent)—or
confront the half-sister (which could distance him from family OR distance the half-sister from the ‘new’ family)—OR
say nothing and endure.