Oh, I've definitely heard of religious sisters being spiritual directors.
Fr. Burns Seeley, SJC, who passed away last year, and was very involved with the Institute on Religious Life, had recommended a great religious sister in my area, as a spiritual director for me, which was very helpful.
I think on a lot of levels it can be very beneficial to have a woman religious as a spiritual director, since you would already have a lot in common. For Confession then, you just go to receive the Sacrament, but not for direction, although the priest may give you some direction, which can be helpful. Many times when I had a priest as a director, I would still end up going to Confession on a regular basis somewhere else, to whatever church was offering it at a time I could go. So yeah, I definitely wouldn't hesitate to have a religious sister as a director, if she is available, especially being someone who knows you and whom you trust. God bless!