Or, or, you could make it super duper weird for him to do that, and (when LO can't hear ofc!) call him Daddy~ iyswim.
Sorry, I'll get my coat...
(in reality, use of "Daddy" like that is so, so gross and skeevy! So, yeah maybe not
)
I get worried about my nan saying I'm my nephew's mum to nephew when we visit, but she has dementia and I do say "no Nan, just his crazy auntie". And I can see the point others have raised about getting into parentmode with a new LO around, especially when actually first time grandparents, that's totally understandable.
But it doesn't sound like your FiL has dementia or is doing this as an occasional slip-up. It's probably something your OH needs to tackle though :(
Aside from this "Daddy" business, has your FiL expressed a preference for which grandparent name he'd like to be called? If not, maybe ask him that first. If he says "I want LO to call me Daddy" or similar, then you definitely know he's doing this on purpose for some totally bizarre reason no doubt. Plus it would give you an opportunity to veto that and diplomatically point out that "Daddy" isn't suitable.