'I love him, he loved and respected me for me at one stage and I live in hope that we'll get back there, he's a good hands on dad to DD's when DSS isn't around, he helps around the house, we get on well as a couple personality wise and I guess I'm too positive for my own good.'
That's the approach that has got you to where you are now. I don't want to sound harsh to someone who is clearly doing a FAB job in the most shitty circumstances but honestly, most people wouldn't have taken this guy back after the spectacular shit-up he made which resulted in your DSS.
Personally I don't believe that this guy respected you in any sense - if so, why has it changed? - you've done nothing to lose respect, on the contrary, you've gone the extra mile for HIS son. No, what you saw then was the rose-tinted early days stuff. You WON'T get back there. This situation is what things are, it is the reality. And that is no surprise, because by any measured, considered, external viewpoint, this guy is a complete waster. That's the truth, and even though you are still pulled in by the 'love' thang - so hard to let go - you KNOW he's a waster.
Your Dad is right.
You don't need him.
He's beginning to make your life a miserable one, and likewise your DDs.
He relies on you, not the other way around.
You now know that one of the keystone 'reasons' for all this is that his parents just don't like you - in other words, you suspected that they were twats who had raised a twat - now you KNOW it.
He's just dropped a particularly nasty bombshell - I'd take this opportunity to respond in kind, and ask him to leave. Personally, now that's out in the open, I don't see what other recourse you have that isn't basically saying 'ok, they hate me, I'll just put up with that.'
No. They hate you? Right, then that's not a family. So, we have two families, yes? He clearly prefers the other one. So, off you fuck, dearie.
You and your DDs will thrive, thrive, thrive without him, and he can go and parasite off someone else... how did I know he wouldn't be earning? Look out MIL, there's an electricity course bill coming your way!
You will cope. Talk to your Dad about it - I bet there'll be reasurances and offers of help coming your way. You can do it.