You sound like every parent on estranged parent forums who claim their children are unreasonable and you have no idea why the estrangement happened. So I am going to break it down from your post.
She's in her 50's and menopausal (may be relevant).
So you are blaming your estrangement on her homones?
* I do remember him commenting that she didn't get her boobs from me but I honestly never thought anything of it,*
He was commenting on her body and it did not raise a red flag for you? You were not bothered enough about your teenage daughters safety to wonder if this was ok? Or bothered enough about her feelings to wonder if this would be upsetting?
doesn't always seem to know where the line is but it never seemed that bad to me, just typical of men of our generation really.
So you minimized the fact that he was inappropriate. And decided that because it did not matter to you, it should not matter to her.
I tried really hard to see her point of view but struggled to hear her talk about him like that, he's not perfect but he's not a bad man and I did say as much to her.
You did not try to see her point of view, you defended your marriage at the expense of her feelings. She told you something that really upset her and you discounted it.
I was very angry on DH's behalf when this first happened
You defended your marriage at the expense of your daughter.
very hurt that she seemed to be punishing me for something I didn't do
So took no responsibility for bringing this man into her life, or your failure to protect her.
* so didn't try particularly hard to persuade her otherwise*
You waited for her to come back to you because you felt you did nothing wrong - I wonder if you ever feel you are in the wring.
devastated that we've ended up here but have no idea how to begin to fix it, she's been very clear that she doesn't want to hear from me. Is there anything I can do here or do I just have to accept that I've lost my DD forever?
Yes, you have to accept the consequences of your actions. If you ever get a chance to speak to your daughter again, you need to apologize sincerely for not taking her seriously and properly listen and take responsibility for what happened. And want it to be because you want to have a good relationship with your daughter, not because you want more access to your grandchildren.