I'm so sorry for your situation. Unfortunately, the police don't always seem to care about kids that have disabilities and often the schools 'pass the buck' when the child becomes violent or out of control. (This isn't always the case - there are many, many fabulous teachers and police who do care).
You need to get your niece a lawyer to fight with the school and defend her against the criminal charges.
Also, if you can't afford a lawyer for your niece if she is going to be arraigned you will get appointed one by the court. However, in this situation, I would do my best to get a lawyer involved pre-court.
These cases are frustrating but can be dealt with, and in my experience, the District Attorneys, although they take into consideration the school's position, they also do take into consideration the 'whole' child.
To be convicted of assault, the state has to prove intent and competancy. Given the facts as you describe them, either of these may provide fertile grounds for a defense. These are very complicated and technical issues, and you definitely need a lawyer to help you through them. If you can substantiate your claims, a good lawyer might very well be able to get the case dismissed without having to try it at all.
Evaluating any legal question requires a detailed knowledge of the specific facts involved. Since a short question will rarely contain all the relevant facts, the answer here should be considered a general comment for your consideration and not legal advice.
You and your sister should stop going to the police station and making statements about the incident and what you think caused it. After police were called, it was too late to try to smooth things over. Saying someone else provoked a criminal act from the child does not deny the criminal act and may easily be construed as an admission of the criminal act. Your sister should immediately get an attorney for your niece so he/she can do the talking. Too often, a person charged with a crime, or a parent trying to help a child that has been charged with a crime, makes the situation worse by comments they make to police.