Franco,
I have certainly heard of women using sperm from their partner's relative but I don't think anyone on here has done that (anyone???). Most of us have found known (unrelated) donors or used anonymous donors from a sperm bank.
I personally think there are several reasons to be cautious about donating your sperm to a relative, but it is a personal decision. If your relative conceives and has the baby are you going to feel okay not being the father but having to see the child on a regular basis? Are you going to be comfortable with the parents' decision to tell or not tell the child about their origins? Are there areas for misunderstanding (such as timing donations) that might lead to family drama? What if someone accidentally caught a sexually transmitted infection from you, would that cause family drama? Will other family members know? There are also legal and financial risks that need to be considered.
I think its best to tread carefully and examine your own feelings deeply. If you are excited about the idea, then get yourself tested for STDs, start looking at sample donor contracts (laying out each parties responsibilities) and go from there. Don't feel like you have to donate though just because someone asked you. It has to be the right situation.