I won't say this is the worst parenting i've ever seen on this site, but it ranks near the bottom. The older sister wants a gift that belongs to someone else, pitches a tantrum, damages the gift and the lesson she learns is that when she gives in to her anger and steals from her sister, she gets to keep the thing she stole? Uh, no.
I am actually all for giving the younger niece an experience gift that can't be taken away. If the parents insist oldest niece be taken along, tell them that won't be possible. If they decline, that's their choice. You've done all you can do. But oldest niece doesn't receive a present for her next birthday. If her parents ask about it, tell them she wore it during the fall.
Is this a pattern with the parents? Do they frequently give in to the oldest because it's easier?