My wife always compares my parenting with her sister's husband's parenting and thinks he is a much better father than me. I find this comparison annoying and heartbreaking. How do I make her understand this?

Brother, you're the man of the house. If her comments are causing friction, you need to set her straight. If you need to get into a fight, then do that. But do not allow her to make you feel small. Man-up and do the righ thing.