That’s the weird thing— unless my sister shows her daughter the e-mail, I don’t think niece has ever been made aware of any major issues and doesn’t dislike the coach. She still starts and gets a lot of playing time. What crossed my mind was what kind of e-mail is sent to those that don’t play all that much? Niece loves the sport.
I agree with you that, even if your sister took a stripe off him, he shouldn’t have sent that email. At the very least, to the wrong person, he’s opened up himself to litigation issues and being a liability to the school. That is bad form on his part.
If your niece seems largely unaffected, she probably doesn’t know about it. IMO, it is best to leave it as no real harm was done beyond bickering between two adults.
Just keep tabs on the niece to see if there are further problems.