This post is beautiful and poignant, it made me cry 
The part about being a woman in front of her, to her and for her: this resonated because being the only two females in the household was part of the special bond DSD and I have. I gave birth to two boys, so I would tell her she was "my favourite girl", and I was really glad my boys had a sister as well as a brother.
DH and I have had another chat. The discussion on here really helped to clarify things and raise points, thank you so so much.
We realised that we can't and won't police what DSD says to her brothers about her now 'being a boy', but we will put some rules in place with her and will also be speaking to the boys separately. We can't stop her telling them she's now a boy. But we can make sure they know we don't believe it and that changing sex isn't possible. We can also make it clear to her that she is not to talk to them about the process of changing sex, like hormones and surgery. Or any discussion of boundaries. At least the boys' ages mean that our ostensible reason for this rule is due to age appropriateness and safe guarding.
We've agreed that, although this is far from ideal, what is right for us is this: DH will use male pronouns for DSD sometimes but I will continue to stick to her name and using 'they'. Our rationale for this is to model to our sons that they don't have to say things they think is a lie, that it's personal choice. And they and DSD will see this outside our house too, some people will object, some won't, and we see that as personal choice rather than hate versus loving acceptance. I am going to explain to DSD that this would be my 'policy' for anyone, including either of my sons, or even DH should he decide he's trans (I'm hoping the idea of that would be so left-field that it'll bring some levity).
Meanwhile, DH will use DSD's new pronouns when he remembers as to him it's a fiction even though he doesn't see DSD as male, and he will be explaining that to our boys. I will also be letting DSD know that I won't be discussing her being trans with her unless she wants to talk to us about it, that she is free to be herself at ours and wont' be criticised even though I won't be using male pronouns.
DH has spoken to his ex and to DSD and told her that he and I want to speak to her tomorrow. DSD has agreed. Wish us luck 🙈
Btw I'm laughing at the comment by a poster about not wanting to be the evil TERF stepmother, I had those thoughts, can you imagine? A lot of teenagers would love to have a villain figure like that to blame things on!!