The good news is: you are now working on the heart of the problem. The bad news is: this is a big problem.
I don't know the answer to this one. I would hope that open and frank discussions would help. I don't know how helpful professional counseling is on this subject. I do think that your daughter's reaction to finding her father in your bed is a reason to continue. Let him go see his doctor first. I would hope that he would discuss any "fears" with his doctor. Perhaps an open discussion there will help him. After that, I would say that you two need to explore how to turn him on. I don't believe this is impossible.
