Id use it. its not like its the same name. I have cousins (brother and sister) michael and michelle, and their sister called her bub Michaela!
My aunties are 'Michaela' and 'Michele' and their sister (my Mum) called her son 'Michael'!

Anyway... I personally couldn't do it. My niece is 'Milli' and I love the names 'Molly' and 'Maisie' but could never use them because of my nieces name, for what it is worth, my SIL would not have a problem with me using these names.

I agree that it may be something to discuss with your SIL she may mind she may not, you will never know though unless you ask

Deanne.