It is so important to not take sides when children are fighting. You can mediate by sitting down and having the kids talk to you and each other with an apology and a hug in the end. You don't want for them to grow up with animosity toward one another so nipping it in the bud while they are children is so important. As the other poster said, it will teach them a lesson in getting along.

Also,I think that it might be time for a break from each other (for you and SIL)... You were probably together over the holidays more than usual. That can lead to some major problems when two people are too different. Sometimes, the cousins start getting too close over the holidays as well and this can lead to problems as well.

Maybe time to think of yourselves and take a step back?!