Could you possibly be talking a bit at cross-purposes? As in, you're thinking that with a LOT of changes, discussion and boundary setting, it could potentially be worth a try but he thinks you are saying definitely no to DSD staying full-time and therefore getting defensive and horrible?
It's a really emotional situation, even disregarding you being pregnant, and I wonder if he would be more amenable to proper conversation about it once the dust has settled a little. He is being a complete twat in the way he's dealing with this, but I think the question is whether this is what he's usually like (in which case ignore me and carry on as you were) or if it's "only" in relation to his DSD.
If the latter ("only"!!) then have a think about all the things that would need to be done differently. Make a list. Is there any possibility that you could make things work?
DSD will be 12 or 13 years older than your baby. Even if things are less than ideal, could you get to a position you could live with for a few years til she is around less?
I hope I'm not being unduly influenced by my own situation. DH and I had some massive rows - particularly when I was ill and/or pregnant or just given birth - where he was vile beyond belief and we got through it and now have a very strong relationship. But I think I always knew deep down that he loves, respects and values me and that it was his hang-ups, insecurities etc that made him behave horribly.
I'm not sure I have a feel in your situation, OP, whether that could be the case here or whether he just doesn't care enough about you and your feelings. You describe it as a "happy relationship" in your post title and I hope you can get through to him that he shouldn't throw that away. If nothing else, he's doing himself and his DD no favours in setting no boundaries.
I hope you get through this quickly, whatever the outcome, and very best wishes for your pregnancy 