Should I cut her off as a friend?...Is it worth being friends with this person or not?

This is something that is obviously bothering you and that you have put a lot of thought in to. Based on your post, I would say that it is time to move away from this individual. Sure, it could be that she truly does not see where she needs to be reaponsible for herself and take ownership of mistakes, but at the same time, you cant make her change if she does not want to. I would advise that you simply avoid her; no need to rehash any of the past issues, as I think you will find that she gives you the sane defiant result, and you wont feel any better. Talk to your sister about how you feel, tell her that it is none of your business who she is friends with, but you expect and hope that said friendship will not come between you two as sisters. No big deal if the two of them move in together...its their choice. If sis begins having problems in her friendship with [her], offer your ear for her to bend, and qualify her concerns by telling her that you understand. Before giving any advice, ask her if she would like it first. Show sis that you love her and care...and sis will see that you are the bigger person, and blood is thicker than water. Best wishes!!