Yes, I was also expecting Nepthug420's response on this.

The situaiton can be compared if our parents had been to the US in the B1/B2 visa. We would have definately claimed them as dependent without hesitation provided they meet all the tests as discussed above.

Here the case is of niece (not the parents). I still believe that it is technically ok to claim the niece as dependent. But in the event the IRS raises its eyebrows, you have to provide adequate evidence that you actually supported her. Again the burden is to collect the evidence.