It sounds like it's not a good idea to spend the holidays with them. You and your dh did NOTHING wrong and should not have to expose your daughter to that kind of behavior. If it comes up just tell them that y'all have made other plans for a quiet holidy. If they want a get together, suck it up and have it at a restaurant or other public place to deterr any emotional outbursts. DO NOT have it at your house, you have less control over when to leave (somewhere else you can leave whenever you feel appropriate). Missing one holiday season with his family is much better than having a stressed filled holiday and adding fuel to the fire!! I say take the high ground and give gifts, but have no expectations for any in return. I think that is a great way of showing your dd and step daughter that we still love family when there are conflicts. What about your step-daughter? Do they see her? That may be something that you have to handle seperately. Your dd is young enough she won't notice their absence, but your stepdaughter needs a say in whether she wants to spend time with them.
Has your dh talked to your FIL or MIL? Did he confront your FIL about the email? It sounds like your dh is a stand-up guy, which means he should be the one handling HIS family. If y'all want to have a relationship with your in-laws, maybe you should talk to a counselor about how to approach it. A non-accusational letter stating how you want them to be in your children's lives (but also stating what behavior you do not want to expose your dd to) might open some doors. I really think that you are in a no-win situation and have to just wait until their dd does something extreme enough to open their eyes.
I'm sorry you are going through all this. It sounds like a very difficult situation. I hope that it all works out for you!!
