What is the ideal conduct to observe with a sister who breaks her promise by using what she borrows in ways that displease Allah, and is it forbidden to lend to her given the likelihood of misuse?

The default rule is the permissibility of lending permissible items to your sister, unless you predominantly believe she will use them for a sin, in which case lending is not permissible. If you know that she is using what you lent her for something unlawful, you must prevent her, even if it means reclaiming it from her. You should also strive to guide her and help her repent.