It can be possible, don't jump to conclusions just yet.

if it is true, would that mean he's your nephew and step child?

Squid

genetics can become dormant and not show up for generations. a man and woman could have brown hair and eyes, come from families with the same, and have a ginger child with green eyes.

Just because those traits don't run in yours or your brother-in-law's family doesn't mean that your nephew isn't his son. Those are all recessive traits and can come up randomly, and even skip multiple generations

All of those traits can be recessive, maybe your grandfather had those, and your sister and you didn't inherit them. Don't be so quick to assume

Don't be so quick to accuse. Your family could carry the recessive traits. And your brother in law could also carry the traits.

Game of Thrones anyone?

Hey, at least he kept it in the family

So those are both recessive traits--if your kid has them, for example, they actually run in YOUR family as well. Your sister's husband may be recessive as well, hence it would look like 'it came from nowhere', but it actually just means recessive (no trait)\recessive (no trait) in that family, with recessive (no trait), i.e. you\recissive (openly traited) i.e. your husband. So in good news, your husband may not be cheating.