The whole problem seems to stem from the fact that you refuse to acknowledge that at 16 and 18 they are perfectly entitled to have a sexual relationship if they want one.
You keep banging on about not getting any respect from her but it sounds to me as though she doesn't get any respect from you. You don't have to like all of her choices, but unfortunately you do have to go along with one or two of them, and if she chooses to become sexually active once she's over the age of consent (even if it's with someone you don't much like) then there is not a damn thing you can do about it - nor should you try. Your job is to counsel her and support her as she explores sex and adult relationships, and to warn her of the dangers of promiscuity and poor judgement where boys are concerned - not to just ban sex out of hand and expect her to comply. Not only is that unreasonable but it's highly unrealistic and you are setting yourself up to fail, and to alienate her.
I think you and her father are in a blind panic and trying to control her as though she were still 12, not 16, and I suspect you are getting pretty heavy handed into the bargain. I think this is the real reason his mother let her hide out in her house - she was perhaps worried for her wellbeing and was trying to put some time and space between you in order to give everyone time to calm down. Admittedly she may have been a bit misguided in pretended your DD was not there, but I imagine her motivation was not to annoy you, but to protect your DD. Plus, if all you do is keep shouting the odds about how you dislike and distrust her son then she may be feeling very defensive and disinclined to co-operate with you.
There is no reason why her BF should not occasionally drink 'hard liquor' if he chooses.
There is no reason why his mother should listen to your demands about what happens in her own home, between two young people over the age of consent.
Of course if these things are affecting her school work etc, then it would be nice if you could come to some sort of compromise with his mother about when/how often she goes there, and you are entitled while she still lives with you to dictate when and where (to an extent) she goes out, but just shouting 'NO! I WON'T HAVE IT! YOU MUST ALL DO AS I SAY!' at everyone is going to get your nowhere.
I don't think he has changed her - I think just growing up has changed her. Stop looking to blame others and accept that she is not a little girl anymore.
You sound very pig-headed, expecting everyone else to fall into line and follow your rules. Just back off for a minute and focus on building a relationship with your daughter where she feels you are on her side. Don't you remember what it was like being 16?
We also found out that when she was 15 (he was 17) he stuck his hand down her knickers & she asked him to stop and he kept his hand there for a few minutes
We spoke to the police about this and they said that they would need to hear the complaint from our daughter.
How did you find out this? Did your daughter actually tell you that she felt at all violated or upset by this? Why and when did you speak to the police about it?