"his mum buys so much for her which has always made me v uncomfortable. Tbh the way dh mum is around dd isn’t too dissimilar, but she’s an older woman with 4 kids of her own so I guess I am less sceptical of her motives."
So he could be mirroring his Mum and how they are is the norm, in their Family? It doesn't mean you and yours are right and them and there's are wrong.
"A girlfriend of my brothers once offered to take my niece to the toilet. I found that just as odd and turned it down"
I think you struggle with anyone who isn't exactly like you, or your Family.
You are hyper aware because of your past and that is making you question people's intentions.
As long as you aren't branding people as sex offenders, that's fine.
But I've got male members of my Family who are like your BIL. My Grandfather, not Biological, though, was. My Son In Law is more involved with my Grandchildren than his Partner (my DD), they don't want children full time, but he loves kids, he is also generous. He is one of my 4 year old GD favourite people, as my Grandfather was mine.
Also, there's a lack of non sexual touching in our Society. Go to other Countries and even heterosexual men are more tactical with each other.
Some people are more open to children. You can be a single Foster Carer, male or Female. Likewise, Nurse, Carer, primary school teacher and be a Man without bad intentions.
Hold off the Baby sitting until your DD is more vocal. Encourage your DD to grow up a bit, by not sitting on people's knees, put it that way to your BIL. Always step in if your DD says no. My GD at four will now tell us straight if she doesn't want touching (her curls are fantastic).
But be a bit more accepting that people are different, not odd, or strange, just different.