D.B.
Sounds like she will "break his heart" either way, whether she testifies for less visitation or just skips it. She needs to talk to him or write him a letter while she is at his house (so it doesn't look like you put her up to it). She can leave the room when he is fighting with his wife. It's hard to leave when he is criticizing or cussing someone out behind their back, but if she has the gumption, that might give the message more. It's not working with you intervening even though I complete understand why you are. He's taking it as criticism and it sounds like it is making him cling to his position even more tenaciously.
I don't know if they will order supervised visitation just because he fights with his wife. I think your daughter is going to have to tell someone - counselor or social services - that she doesn't want to go under those conditions. Maybe just have some dad/daughter time outside of that environment???
By "all she could do not to cry" I hope you don't mean with the counselor -- she should definitely let her hair down there! Perhaps her Dad will go to a counseling session at the counselor's request, and leave you out of it?? Maybe he needs to hear it from an objective source?