I fostered a friends cat for four months. He only came out of the room when I was home and even then it was only for very short periods of time. He was just mean to Paizly and was three times her size. He did pounce on her once and it scared me to death. But he was just as happy living in that room. Now that he is back home with his mom.............he's living in another bedroom and he is fine with that.

I've had Jax for two and a half years now. Paizly still throws a fit if he gets too close to her. BUT she is not stressed out. If she was showing signs of stress I would have had to do something about the situation. Most of the time, like catnapper said, I will just ignore their little tiffs. And sometimes Paizly sounds like she is being killed. But I know she's not, so I don't react.

I think you could (if everyone in the house is willing) give it some more time to let Alison and Nyarly work things out. Of course under close supervision. And if Nyarly wants to hide out in the bedroom, let him, if it's not a problem for you.
But you should definitely get in touch with your niece to find out her long-term plans.