I do think that you should try to separate your relationship with your sister from your children's relationship with thier aunt.
I understand that once you move out, you will not be allowing your sister over to your home to visit them...because of the nature of how you interact with her. And it's reasonable to say that when they are with their grandmother, your sister can visit. Really, until your sister does something specifically to your kids, or tries to turn your kids against you, not allowing them to even talk on the phone is a bit much.
It doesn't sound like you are too worried about your kids' safety around her, so I think the best option is to decouple the relationships. Your relationship with her is not tied to her relationship with your children. Sure, you all won't be spending time together, but if she wants to talk to them on the phone, or visit them when you aren't around, then it should be ok.
I do think it's a bit much to deny the phone call, since it's something that could have happened without you being involved. I understand it's an emotionally charged situation and it's hard, but I believe that the right thing to do is to allow her to be involved in thier lives as much as she's willing to.