From your posts, I am guessing you are in the US?
I urge you to spend whatever money it takes to get your daughter into the best therapy you can find. The children need therapy too.
Then you need to spend whatever money it takes to hire a family lawyer and discuss the situation. Find a good lawyer - one who practices mediation in divorce cases as opposed to one who will urge the all gund blazing approach - and ask for a realistic assessment of what your daughter could achieve through establishing visitation or seeking an end tonthe contact.
Sadly, if you're in the US, regardless of his failings, you and your daughter and the grandchildren will be stuck dealing with this man until the younger child turns 18 or he loses interest. The question for the lawyer is - is it better to have an ad hoc arrangement with a narcissist or to turn everyone's life over to the family courts until the youngest child turns 18?
Be aware that he is setting you all up for a charge of parental alienation. I think your daughter may suspect this and is trying to avoid such a charge at all costs. There are therefore pros and cons to getting a visitation schedule in place.
The pros are that your daughter won't be subject to the whims of a narcissist and will do what the court orders when it comes to visitation. Or so the optimist in you may believe...
Fwiw, unless this man has lost his license due to his driving, he will be allowed to have the kids in his car. Unsafe driving of all kinds, running stop signs, playing fast and loose with seat belts - unless he is getting pulled over every time, his driving is a case of 'eye of the beholder'.
The cons are huge - the narcissist can try to assert to the post divorce court as the mother is alienating the children from him. This can result in a motion for contempt of court, which can be incredibly distressing, hard to fight, and jail or loss of custody can be ordered by the judge.
Any visitation agreement will involve clarification and delineation of the rights of both parents when it comes to medical care decisions, including whether the children can go to therapy to deal with the impact of their fathers personality disorder on them.
It will also involve delineation of the rights of both parents over choice of school, extra curricular activities, social life of the kids when they are teens, part time jobs of the kids when they are teens. Does your daughter want to have to sit down with her ex and discuss whether the kids can do a school sport or join the marching band?
Speaking from personal experience of being abused through post divorce court by my vindictive narcissist exH for nine years (three separate motions for contempt of court) I urge you to tread very, very carefully.
The important thing for your daughter is to try to maintain a relationship with the children in the face of the narcissistic behaviour of the father. The mother and children need to do therapy together.
I think you and your daughter need to do some therapy together too. I get a sense that you are pushing solutions on her that are not feasible for her right now. I am not faulting you in any way for this - you are truly an angel in her life and in the lives of the children.
But she is in a very vulnerable position. Do not underestimate the effects of dealing with a narcissistic, abusive man. Your daughter is very likely suffering from cPTSD and a massive amount of anxiety.
Don't press her to take action. Poking the bear isn't always the way to go with a narcissist - you may find that the family court will let your daughter and the children down very badly. You can see the massive problems here, but be warned thst there are very few judges who have the slightest idea about the deviousness and cunning and sheer evil of a narcissist.
I wish you all well. Please get the mother and children into therapy.