We had a similar conundrum which remained unsolved until the 1911 census prompted a bit of lateral thinking.
My grandmother (I’ll call her Mary) and her brothers were orphaned in the 1890s. The younger brother went to live with his uncle George (father’s brother) and was described as “nephew” in 1901. That was straightforward. But Mary and her elder brother were living with a seemingly unrelated family and described as “adopted”. However, we felt there was a connection as two of the children in this family had names that “run” in Mary’s family.
We got the MC for the adoptive couple, but couldn’t trace a birth reg for the wife, Ellen. Her maiden name was the same as Mary’s grandmother (albeit spelt differently), but we couldn’t find anyone in the tree to match her.
1911, Mary is still with this family, but now described as “niece”, and what’s more, her cousin from her uncle George’s family is also there and also described as “niece” (are you lost yet?!). So we took a good look at Mary’s parents’ sisters, and finally deduced that Ellen was her father’s eldest sister, baptised Helen but sometimes recorded as Ellen. We had never been able to find a marriage or death for her, or any mention of her after 1871. It seems she married using her mother’s maiden name, for reasons we can’t be sure of but may have been because both of them were under 21. Perhaps there was some family opposition and they were covering their tracks.
Anyway, I offer it as an illustration of someone who really was a niece being described as “adopted”, and of how things are not always what they seem, even on official documents.