From personal experience, I would not breed her. Our Sicily sounds just about the same- close to 4lbs (more around 3.5) but the vet said that as long as we found a male that was at least her same size or smaller, she'd be fine. The first litter that she had only had two pups, one of which got stuck and we had to pull him out (he didn't make it) and then rush Sicily to the vet for an emergency c-section to get the other puppy out. (This vet said that if we would have gotten her there 30 minutes later, neither would have survived.) Even if you plan for a c-section, they are very expensive, and if you are planning to breed and make your money back, you most likely won't.
We did plan a second litter, due to the vet saying that it was more the fact that the first got stuck than Sicily's size (yet again, bad vet advice) that caused the problem, and the same thing happened. Luckily we had done x-rays and measurements this time, so we knew there were only 2 pups again, and we had to do another c-section. (This vet said that if there were 3+, we would have most likely been fine, but becaue there were only 2, they grew too big.) Yet another expensive vet bill, but not nearly as much as the emergency one.
If your sister really wants a yorkie, I would go buy one. Once you figure in the cost of a stud (much more for a smaller stud) plus the vet bills (x-rays, possible c-section, checkups for the puppies, etc) You'll be spending WAY less. Plus, it really is taking a big chance on your little girl's life by breeding her. Now that I've actually gotten good advice both here and from a (finally!) good vet, we are going to be fixing both our little girls. In the future, if I do decide to breed again, I will definitely get a larger female that won't require as much human intervention.
