@aodoherty
You can't just empty the green/red/pink bars. That won't work. If you see a sim on the relationship panel, then they have a relationship. You need to DELETE it completely so you don't see them at all on that panel. Don't even talk to them once it's deleted because that will just create a new relationship.
Just use MCCC to delete it: This is how:
If you want to delete the female sim's relationship with a sim, make sure the female sim is active, click on HER, and select...
MC Command Center \ Relationships \ Delete Relationship
Once the sim window opens up, Make sure you select the sibling that you want to fix. (And any others you want to delete her relationship with) and click the check button.
Once that's done, don't even talk to them! Go straight into CAS and you'll now have the option to set as siblings.
@daikoyu
You can actually do that. Create a parent/child that are the same age. It just takes extra steps.
The problem is, CAS won't allow it. So, you have to bypass it. Pick two sims that are the same age that you want to make parent/child. Make sure they're both in the same household and take them into CAS. Take the one you want to make the child and lower their age down one age group. (or raise the parent up one) Once they're different ages, make them parent/child. Then just save the household and exit CAS.
Once you get back into Live mode, go into MCCC, click on the sim, go into "MC Command Center / Sim Commands / Set Age" and set them back to their normal ages. They will be back as they were, but now with a parent/child relationship.
The other method you mentioned is the only way to set the sibling relationship on console or without MCCC. Save each sim separately to your library as separate households, then create a new empty one and merge the two back into the new one. Their relationship will be deleted and you can set the sibling relationship. It takes longer because you have to go through separating them into separate households, save each to the library... merge them back again... it's a pain. Plus that method has the side-effect of deleting ALL relationships they have with EVERYONE. Not much fun.
MCCC is much easier.