Oh ontheedge, I could have written your post a few years ago! No judgment from me at all.
I have a similar dh. I have done all night parenting for 12 years.
You just need a good plan.
I wouldn't actively explain/ tell dd that she is too big for a baby bottle. What is the point of that? To make dd upset?? To make dd wish that she were smaller and a baby?
I would think that you need to help dd to reject and throw out the baby bottles. Do this in the daytime.
How about you and dd discover that all the baby bottles are 'dirty'? (But that she can drink at any time in the night out of the lovely clean nice new children's water bottle that will be either on her bedside table or in her bed).
A Plan:
(1) Go and buy a good kids water bottle - the sort that can be tossed in school bags and won't leak even if it is lying on its side.
(2) Collect all the baby bottles. Get your dd to help you do this.
(3) "Check" the baby bottles together and then you and dd can "discover" that they are "extremely dirty" or "broken".
(4) With dd helping, throw all baby bottles out.
(5) Dd can fill up her new drink-bottle with water (and maybe a couple of ice cubes...) before she gets in bed.
I did the above and there was no tantrum / screaming. My dd woke up the first night crying for bottle and I tiptoed in and whispered that she could help herself to the lovely clean drink by her bed.
With the lying next to her in order for her to go to sleep, I've been there as well...
My mother gave me great advice for this. My mother told me to make sure that the bed / bedroom is always a nice, snuggly, relaxing place for your dd. So you need to really avoid threats / being cross / letting her be scared / too much rigidity. Have you got a nightlight? If not, you might need to buy one and also a special soft toy for cuddling.
With my dd, I had to make changes because I needed her to be independent before her little brother was born. It took 2 months. So I started by instead of lying next to her while she fell asleep, I put the soft toy next to her and I just sat on her bed in the dark - maybe next to her, or maybe at the foot of the bed.
Once she is comfortable with that, you sit on the floor with her holding your finger. Then after a few nights, you sit in the middle of her room (sing or hum or tell story) and don't cuddle her while she goes to sleep... and so on. Eventually you can happily sit in the corridor outside her room and she will be comfortable going off to sleep on her own.
You need to reinforce this with night wakings. When she wakes up in the night, as well as whispering to her that should might like to help herself to a sip from her clean water bottle, (ie don't you give yourself a new job of handing the water bottle to her in the night!) I used to find the soft toy and whisper "cuddle Blue bear"... "Blue bear is soft" "Sleepy sleep" etc for a few minutes and then she would be asleep again. Don't turn the light on when you go in.
You must be very tired - night parenting is relentless.
Take care of yourself, and if you are overwhelmed, just try and fix one problem at a time - if I were you, I'd deal with the baby bottles first. Then handle the lying next to her when you have enough strength.
P.S. I found all of these issues were made more difficult because my dd was ready to night-time toilet train at the same time that I was trying to get her to sleep quietly all night. It is counter-productive to try to soothe a child back to sleep when they have woken up to use the loo.... So if she doesn't settle fast with whispering, help her tiptoe to the loo and then straight back into bed with no lights on.