Gosh, what a situation, I'm so sorry!
Okay, if I were in your situation, I'd ring up your dad (only if you feel comfortable doing so), thank him for being honest (because hey, that takes guts to admit something like this) and get some more information. Eg, was it as a PP said, where your dad has suddenly noticed your DD's development, then quickly pulled himself up on it, or if there are deeper issues at play, like your dad having intrusive thoughts about sexual offending / being tempted to act on those thoughts. Sorry to mention this, but he may have been a victim of sexual abuse himself.
Regardless, your children's safety is your top priority and things will be awkward anyway, so I wouldn't have your children stay with him in the coming days. I also think it would be beneficial for your dad to see a counsellor ASAP to talk things through and for you to see a counsellor as well.
All the best for you at this very difficult time.
Edited by Silverstreak, 30 December 2017 - 10:33 AM.