The gifts are getting bigger - I feel he is trying to "out gift" everyone else, like it's a competition
Last year, the other grandparents bought my daughter a gift - FIL insisted on giving them the money for their gift - is that odd?
Yes - it's odd.....but not if you understand narcissists and how they operate.
My first thought was maybe he's overcompensating given the past history with his own dd.
Then i read the other stuff about him interfering in your marriage, always trying to undermine you, throwing tantrums when he can't have his own way......and i changed my mind.
He's playing that old game of 'divide and conquer' - and he's playing the long game.
He's trying to insinuate himself as the 'good/best person' in your dd's eyes - keep giving her gifts, out-gift others and if they do buy her a better/bigger present then he has to find a way of re-asserting his power/influence.
He's still interfering in your family life AND getting away with it.
He probably thinks he can buy your dd's affection, trust and love whilst she's too young to understand.
Once she hits her teens and you begin to experience the natural rebellion of rules and boundaries - he's making sure HE is the person she goes running to.
No doubt he is already planting ideas and thoughts in your dd's head - 'i buy you all this because I love you.......they don't really love you cos look - their gifts are never as good as his'
You and everyone else needs to stop pussyfooting around him.
YOU are the parent and in control here - not him.
You decide what is acceptable behaviour - and if he doesn't want to play ball then you take away his toy......that's what your dd is to him - a toy to be used and played with whenever he wants the satisfaction of having a dig at YOU.
I'm sorry your wife isn't here to put her dad in his place or to protect your dd from his toxicity - there's only you who can do that now.
You've done the best thing by going NC with him, yet he is still undermining your authority.
I think it's time you tell him the consequence of not abiding by your rules - losing contact with dd - and be prepared to follow through the moment he ignores that.
He has no 'rights' where your dd is concerned.
Your dd's wellbeing is all that matters - is your dd benefiting positively from his input in her life? Or is he sowing bad seeds in your dd's head?