As I understand it a draft is basically like a 'safe' form of cash, and when your sister paid for the draft the money was already drawn down out of her a/c - that's like any draft I ever raised. If the vendor's solicitor has lost the draft, and not lodged it in his a/c, that's his problem not your sister's, and he should not be approaching your sister in the manner you have described.
I would certainly not sign any indemnity form in case the first draft might turn up and she would be liable as a result. And furthermore I would seek independent legal advice on whether or not she could rely on the vendor's solicitor reliably signing a counter indemnity form, in the event that the first draft turned up.
You mention that this transaction took place over a year ago, and I take it she has all her house purchase documents in order. What comeback has the vendor's solicitor got if she does not co-operate, as I see it full fault lies with them, and your sister will be doing them a favour by 'balancing their books'. What is it worth to them ? It certainly should not be the abuse she is receiving.
I would suggest your sister informs both parties that she is going to report them to the Law Society in one day from informing them, describing to them what you have decribed here. If she does not get a favourable response go ahead and make a complaint.