I apologise, I haven't read the full thread.
OP, I both empathise and sympathise, I have a crap FIL too.
Like you, I do not think it my place to dictate my DH's relationship with his father.
However, I have certain boundaries for myself and our daughters.
I will not tolerate him being snide and rude to our daughters, or putting them down. When he made a snide, and uncalled for comment, implying that DD2 was overweight, he crossed that boundary. At that point, I said to DH, he had every right to maintain a relationship with his father, but the DD's were not going to be forced or guilted into pretending to have one with him, by being required to do skype calls with him. It was up to them whether they joined in or not. They choose not.
I don't do anything other than remind DH if his birthday is coming up, or Fathers Day - up to him what he wants to do about it.
Because of FIL's ongoing refusal to respect our boundaries, DH is virtually no-contact with him now - he even got to the point of unfriending him on facebook because of the xenophobic, and islamophbobic crap he posted to him, despite having been firmly told not to.
But that's up to DH. However, I do feel you have the right to set boundaries for yourself and your children.