Is their room big enough to put in a partition to allow some privacy? This might help matters. Or perhaps have a rotation where one gets the room to themselves for X amount of time in an evening so they aren't stuck in the room at the same time. And encourage them to go out and do activities in the evenings / weekends so they aren't hanging about getting bored and angry with each other.
Whilst it's all good & well punishing the kids by taking stuff out of their room etc. the fact remains these kids are under each other's feet, don't have any privacy from one another and just because they are blood brothers doesn't mean they get along! There might be a severe personality clash and teemed up with going through a hormonal age where they don't listen to reason, it's just going to make things worse.
Just for the record, I was verbally, psychologically and sometimes physically abused by my brother. Things deteriorated around the age of your sister's children. He was/is a horrible individual, I still don't speak to him. Had we shared a room, I most likely would have murdered him if he didn't off me first. Just sharing a house was bad enough!
She should think about re-homing the dog if it is also getting stressed from the situation - it can't help matters, surely?