Is my older (26 year old) sister being ridiculous or am I?

Ok I'm 17. (before you start answering! lol) My sister is very very religious, and there's nothing wrong with that, but she's more of a cult-type. I'm Christian myself, but for example, my nephew (her's) were joking around and he was calling me "a pretty girl" (lol) and so I was calling him the same thing right back and we were laughing about it and my sister came in and gave him this whole big lecture that if you say things that you really don't mean, the devil will make you think it's true and he will become 'gay' because he 'thinks I'm pretty'. But we were clearly joking by laughing and nobody was upset and he doesn't repeat any of these silly things to anyone else but me or his other uncle (my brother) not that I'm trying to convince anyone that she is wrong and I'm right but I just want to know what to do, just talk to my nephews in a serious and monotone voice and never have any fun?! By the way, this isn't out of the ordinary for her, I just want to know what to do at this point.