Have you also validated dd1's feelings too though?
Because as the one who always had to back off, do more chores, give up what I wanted to do, I would have so appreciated an acknowledgement. The "well I haven't seen you do anything wrong, but you must have to make them react like that" is very hurtful. It feels like really they think you have done something. You may have apologised to her, but I'll bet you did it quietly, so not to upset dd3.
Nothing remotely on that scale, but I remember one holiday. We used to go to a self-catered place and the rule was we all did equal chores. Normally we went for teams, so team me and dad would do the picnic and Mum and brother would wash it up when we got back, then me and mum would do the cooking, and dad and brother do the washing up. Then the next day we'd swap round so over the holidays we did equal amounts. One year, he would have been about 14/15yo. Dbr refused to do anything. So I ended up doing all his as well as mine.
Not one word was said over the holiday about him not doing anything. At the end, my parents came to me and said thank you, and gave me £30 (a lot to me then as I didn't get pocket money) as long as I didn't tell him that they'd given me that money.
I didn't tell them this, but actually I was hurt. Because, you know, if he did something, then he'd be praised to the skies in front of me. It felt like my feelings didn't matter next to his.
I'd have rather they'd said a very basic "thank you for all your hard work this holiday" casually at one of the meals. It wouldn't have had to be a big thing, just that acknowledgement would have meant everything.
And a few months later, something was mentioned about dividing jobs and dbr said that he'd done more than half the work on the holiday, and both parents were falling over themselves to agree with him . Outside they again said to me that I'd done more...
Again it felt like his feelings mattered far more than mine.
It sounded like you validated dd3's feeling enough by expecting dd1 to tiptoe round her.
Please don't feel that I'm having a go. I think you were in a dreadful position, but please don't underestimate how much your dd1 is hurting. She may not say anything (I never said anything even if asked directly) but I'm sure she is scarred by the situation.
And, like my parents, you are too afraid of the consequences to stand up for her publicly.
If it's any help, when my brother went off to uni he got hit by the real world, and that people didn't endlessly make allowances. It wasn't easy for him, but he came out the other side a much better, and happier, person than he went in. He's now quite a decent member of society. 