Welcome to Lifesupporters
First I would like to say something as a person, completely outside of the situation. In fact you may want to read your own post as if you were completely outside of the situation. This might give you a different view or 2.
There seems to be some grey area, or perhaps just bits and pieces of a longer tale that are missing. I can understand why your father has been taken into custody. The law is what it is, and they cannot ignore claims such as these. This whole thing is going to be a life changing event, the sort of thing that can potentially tear a family to pieces.
I caught my brother doing "things" to my sisters and it tore our family apart. Some believed it happened, some didn't. I do not talk to my brother at all or any of the family that stood up for him, and this happened almost 20 years ago. Any time an incident such as this happens or a person gets accused (regardless of the truth) there will always be lingering emotions, doubts, and other emotions. There is no riding the fence for anyone right now because of the nature of the accusation.
Now... If I were in your situation (this is me not you) I already know what I would be doing, because I've sorta been there. I have to admit that I do not have strong family ties though and I do not have a problem forgetting about anyone for the rest of my life. For some reason it is easy for me to eject a person from my life.
You are in a difficult situation if you want everyone to just be a big happy family once again. Just because it's not up to you alone. You can indeed try, mediate, and make and attempt to show reason to everyone. Prepare yourself though, grow an extra tough layer of skin. You will almost need an emotional barrier of some sort because all the insults are going to get flung at you as well. Especially if stories are just being made up for attention.
This makes me wonder if something else isn't horribly wrong in your one sister's life (the one you said that is exaggerating about what happened in the past). These actions are not born from rational behavior. There simply has to be "something" wrong, and please do not think that I am pointing a finger at anyone here. I am no expert but I have had a few chances to see true mental illness, as a few of the other members here know.
If everything falls apart, all I can say is be prepared. Anything is possible in such situations. Including a complete division of the family or even a complete breakdown of what you believe to be the truth. I truly hope that everything works out for everyone involved and that sanity makes a return in the near future.