With family I think you are just going to pray to God that His will be done, I mean on how your family leads their lives and ultimately that the paths they choose are the ones God intends for them. I don’t think you will be able to keep your son and nephew apart without creating a serious rift between your families, and ultimately, I don’t think you can keep them apart forever, they may try to get in contact even without your consent. It happened to mine.
It can be really hard to have family who smoke pot and are bad influences. But I think if you bring your baby up with the right teachings and values, he will be able to make the right decisions himself.
Within my own (extended) family we are quite a mixture. My parents did their best to bring my direct family up as Catholics, and out of six children 2 are atheist, 2 are laps-Catholics (but they do try a bit, one goes to mass every Sunday and they both say grace, etc), and 2 practising Catholics. We all chose our paths ourselves though we were bought up with the same values and had the same family influences. With my 2 siblings who are atheist, they totally rejected my cousins who not only did drugs, slept around, always got in trouble with the cops and were (and still are) alcoholics. But its funny because they eventually chose to lead these sort of lives themselves, though they still don’t like to mix with them. For me, the influence of my cousins just sort of strengthened my beliefs and values, and made me a better Catholic. And though I dearly love my cousins, nothing they could do or say will ever make me throw away my own values and start doing what they used to do. (They are much better now, I think overall we were a good influence on them. One of my cousins said to me recently that he thinks he should start praying to God, which was totally out of the blue since we never actively tried to preach to them our faith, instead we just practiced being good examples.)
I actually think your extended family is better than mine as Catholics. At least they indulge in bed time prayers rather than nothing at all like my extended family. That in itself should give you some assurance that their children will not be as bad as you think they will be. And though I’m not proud of it, I swear quite a bit myself, but that doesn’t sound good if they are swearing in front of the kids. Maybe you should talk to them about this that you don’t want them to do it in front of yours? And if they call you Catholic fanatics, say that has nothing to do with faith – its about morals!
Another thing is I don’t ever think you should ever say (even if your thinking it) that your kids are too good for theirs. My own mother was always loving towards my cousins, even though she knew the kind of lives they led, she would just always say to them “pray to God” if they were having difficulties. And because she never judged them, they know her as their loving auntie and they also know that she is very religious. It may be a good idea when their kids are older, just to invite them over to your place to stay with your family and let them witness the kind of life your family leads, as Catholics.
And to do with the violence – I dunno, I used to watch wrestling and violent films myself when I was younger (unbeknown to my parents), and I used to play wrestling with my brother and have sword fights with my best friend (out of tree branches) but I always knew that this was just tv and you didn’t treat people like that in real life. But that was just me and I know all kids are people and they have different ways of thinking to others, so I suppose your kids may react differently to it than me

Just watch them and talk to them about it if you ever think it may become a issue.
I was always told by my parents too that Jesus said that if someone slaps your right check offer them your left, and that has always stuck to me through out my whole life.
And always remember – “A family that prays together, stays together!” ~<3 Make sure you often say the family rosary <3 And do it in front of your small children! I know a 4 year old who can lead in the rosary (though its just the Our Father and Hail Mary parts.) God Bless.
Ps. Im sorry this is soooooooooooooo long!!