He maybe her biological father, but that doesn't mean he can come back into her life just because he now likes the idea of being a dad. OK, so he wants to get more involved now (I am assuming the sleepless nights and nappy stage has now passed?), but what is to say he won't go off again? I know he may have grown up and everyone deserves a second chance etc etc, but you can't guarantee that he won't hurt your daughter by disappearing.
At the same time, if you don't let him see her, your daughter in turn could ask you why you never let her see her dad. Is there any way you could arrange meetings with him to meet your daughter when you are around so you could supervise?
As you say, he is her father so he could easily go to court and demand access... it may be easier to come to an arrangement, by as I have just written, letting him come to the house on your terms. It might also be a good idea to seek some legal advice (I think Citizens Advice are fab - well the one in my area is good) - just so you know what the law says in these situations and so you know your legal rights in case he does go down the road of legal access.
As for the religion, I don't think he has any right to make her grow up as a Muslim - you are the one that has been bringing her up and in theory he should respect this, but that is in theory!! Fine, let her know about the religion as it is part of who she is, but don't let religion get in the way. At the end of the day, which religion she follows should be her choice - not yours and certainly not your ex-husband's (well that is just my opinion - there may be others who will disagree).
It is a difficult one and I am not sure if I have helped....