I hope she gets some help from someone. It is a tough situation but a little resoning with her is the way to go. Provide some hope for her, she is probably very insecure and needs reasurance. If you help her out you'll feel very proud of yourself. It is a continual proccess and there isn't an easy way.
First off, your parents should say that they are sorry for getting mad with her for smoking etc and explain that they are trying to help her. Restore some trust and freindship. You wont get through to her if she thinks that you guys are her enemies. Ask her what she thinks would be useful for her. Then raise some ideas on what they think would be a good idea. Maybe school isn't for her. Maybe try and line up a job for her etc to try and give her some independence she is wanting.
Don't force any ideas on her. She will back away into her shell. Reason with her and state your ideas and arguments objectively. You musn't create arguments. Continually work on ideas and encourage her to figure out problems herself. In the end, she will be the only one to be able resolve the situation, but you can help her achieve it. People in these situations need a lot of help and guidance, and family is the best help, given the right approach.
And jail isn't help. It is a waste of your lifetime, nothing more. If you really run out of options and are in dispair, I'm sure there are many groups out there that help people like your sister.
This also applies to your sisters boyfriend. Everyone is human, you just need the right key to unlock the safe of reason and understanding.
Please tell yourself and your parents not to give up on her. If you give up on her, what hope does she have? Life is full of ups and downs and that's what makes it wonderful to be alive. You will learn more from the downs than the ups.
I hope that helps. Good luck.