The daughter of a sister through breastfeeding is forbidden in marriage
Yes, this child has become a brother to your wife through breastfeeding, so he is a maternal uncle through breastfeeding to your children from this wife. So it is permissible for your daughter – from this wife but not from any other wife – to show in front of him what she shows in front of her mahrams.
The evidence for that is the fact that the Prophet (peace and blessings of Allaah be upon him) said: “What becomes mahram (forbidden for marriage) through breastfeeding is that which becomes mahram through blood ties.”
Narrated by al-Bukhaari, 2645; Muslim, 1447.
And the daughter of a sister through blood ties is a mahram, because Allaah says (interpretation of the meaning):
“Forbidden to you (for marriage) are: your mothers, your daughters, your sisters, your father’s sisters, your mother’s sisters, your brother’s daughters, your sister’s daughters”
So the daughter of your sister through breastfeeding is also a mahram.
It says in Fataawa al-Lajnah al-Maa'idah, 21/116
The breastfeeding that makes a child a mahram is five or more breastfeedings within the first two years. If the breastfeeding of the two brothers was like that, then they are brothers through breastfeeding, and the children of each of them are the children of the other through breastfeeding, whether the milk belonged to the father and mother or to the mother only, or to the father only. And it is not permissible for either of them to marry the daughter of the other, because they are the daughters of his brother through breastfeeding.
See also question no. 45819.
And Allaah knows best.