Cally, What are your plans as far as creating a boundary with your H?
Are you willing to leave the M if things don't improve?
I have to say that I've had some sympathy for him..due to the erectile difficulties..but that FLEW out the window with this latest discussion with your daughter. That is inappropriate to the nth degree. I would no longer feel safe with him in charge of her, alone. It sounds like his judgement is getting cloudier and cloudier.
I would think about setting a boundary and presenting it to him. Then follow through if he decides to engage in any more risky behavior than he already has.