One of your concerns is you don't want to cut him off from his granddaughter. Is that for his benefit or hers? I'm going to make the assumption that it's a bit of both and offer you the perspective of a granddaughter who grew up with a not so wonderful grandparent (grandmother, in this perspective).
When I say grew up, I mean that my grandparents lived about 30 minutes from us, so we saw them pretty regularly. My grandmother was many things... withholding, emotionally controlling and abusive, unkind. She drove away many family members (her eldest son and his children, her own sister, who we briefly reconnected with years later). I have a vague memory of how 9 year old me would never be as smart as my 4 year old cousin. My dad (middle child) was the dutiful son and would drop whatever he was doing to help her out (lots of emotional abuse and withholding as a kid, came out many years later). I remember thinking, at a very young age, that I didn't like this woman. She disowned and "reaccepted" us so many times through out my childhood that I've lost count - the longest stretch of time was when my dad's younger brother (who was far worse than she was... verbally abusive, physically threw things at his nurses, kicked my father once). We didn't speak to her for a long time, and I was actually relieved (I was a youngish teen at the time). Sometime during my teen years, I admitted to my mother that I didn't like grandma and I felt horrible about it, and it was a grown up conversation between the two of us (my mom didn't like my grandmother either).
By the time I was 18 and in college, I put my foot down and refused to visit. My dad played a major guilt trip on me... partly because "duty" runs deep and I "should" want to visit my grandmother, and partly because I think he wanted to do the same, but again, "duty." She passed away a few years ago, I didn't visit her in the hospital and I don't regret that. I attended her funeral to support my dad (who was feeling all sorts of things), but that was it.
I tell you this because I get the sense that the "duty" to have a relationship with your father, and that your father and daughter should also have a relationship. You don't mention how old your daughter is, but even at a really young age she'll be able to tell that your father is a negative person to be around. At best, she just won't want to be around him and will just be annoyed, but being around someone like that can really negatively impact her self esteem, her ability to communicate what she wants, her self confidence. She'll be able to pick up on your reactions too - if you cringe when you have to talk to him, or are in a bad mood afterwards. Kids are really intuitive - she'll figure out one way or another that being around grandpa = not happy times.
As far as your father not wanting to end up alone... you can try talking to him, but this was a lifelong habit of his that he's not going to just break in his 60s. A wake up call (like limited access to your daughter) could help, but even then... I'm sorry, I'm not convinced it'll help. My grandmother died alone and it was the happiest she could be, because she could lament to whatever spirits that her family was awful and abandoned her and woe was she... Good luck!!