I think my dog got together with her nephew

I know very little about dog breeding and/or imbreeding.
   
Our older female(Pekingese/Shi-Tzu) had a male puppy (Above mix that i really don't want to type out again)that we gave to some friends last year, and we got an additional female (because I feel in love with her). She is Pekingese/Jack Russel terrier...Same mother & Different father to our two females.)
   
Our problem is we think that our new pekingese/Jack Russel got together with her nephew (The above mix).
   
The question is that I've read dozens of thou shalt not imbreed... Could this possible litter, that i'm not even sure is going to happen, could they be deformed or hurt the mother?
   
I'm just really worried, and would appreciate it if someone would tell me the honest truth. I have one friend saying that you could even breed grandfather to granddaughter and no problems will happen, but on the other hand all the other information says it gross(which I agree). I just don't want my baby to have to watch deformed puppies die or loose her in the process.

Not likely to be a problem. Mother/son, Father/daughter, brother/sister - now that's too closely related!!!