Don't think it is your fault that he is doing this. I, too, have had troubles w/ my parents (Mom especially). I never caused trouble, never rebeled, never drank til I turned 21, got straight A's, never talked back.... I followed all the rules. When I got engaged to my now DH, my mother stopped speaking to me because she wanted to plan the whole wedding and not leave anything for us to do. She had ideas of no bridesmaids, her choice of wedding dress, no more than 10 friends invited, but 150 relatives, some of which I never met. It was becoming her "show". She threatened to take her money, and so we agreed it would be better for us to pay for the wedding as my DH had a good job at the time and could afford it. My DM was encouraged to be involved w/ the planning, but she wanted to do it all or not at all. Then my grandmother told me that my mother had told all the relatives from her side 90% of the guests to RSVP that they were coming and then not to show up. I asked my DD what could be done, and he did not want to get involved seeing as he had to live w/ her. So we packed up and eloped and had a beautiful wedding w/ just the 2 of us. She hadn't spoken to me for 2 yrs, although I remained close w/ my grandmother and aunts and uncles. We finally reconciled and all was well.
Fast forward 2 yrs... My brother's then girlfriend lied (as a previous poster mentioned might have happened) to my DM and I only found this out when I called and called and called on the phone w/ no answer. I held a part-time job under my mother at her workplace, and her secretary proceeded to "pick up" the paperwork at my full-time job office and tell me I was no longer needed. W/ much effort thru calls and letters and discussions w/ other family members, doing what you are doing now, I realized there was no hope in the matter and I "gave up". I decided to not confront her at her home. Thru many many late nights w/ my DH crying on his shoulder feeling so unloved and rejected by my own parents (if they couldn't love me, who could), I finally came to the realization that it was NOT my fault. You must understand that. He has a problem, and you should pity him for missing out on being a part of his DD's wonderful life. All you can do at this point is leave your door open for when he wants to enter it. But you can't make someone have a relationship w/ you. Let him know that you love him, and want a relationship, and that your door is always open for him, but that is all you can do at this point. I am sure he has his reasons.... But from me to you..... there is no good reason to shut out a child. Don't let him damage your spirit and make sure to break the cycle w/ your children. As for me, 5 years passed by w/o any word from my parents.
Luckily, I have a wonderful DH who got me thru those terrible times. I learned from the pain and became a much more independent person because of it. He and I became much closer from the difficult times and we are happily married coming up on 12 years. But it did put a huge strain on us since I was depressed and felt unworthy of love. Your DFiance sounds like he is very supportive and loving and will be there for you thru these tough times. You will depend on him greatly thru these tough times as they will be tough for him to see you go thru this pain. As a previous poster mentioned, you might want to seek professional help as it took years for me to get thru the anguish over being rejected by my DM, and since I too was Daddy's little girl, my DD who stuck by his wife rather than telling her to knock it off.
Anyway, fast forward to 2001. I had just had a difficult labor and delivery (almost died from rupturing). The nurse is teaching me how to nurse this darling baby and I feel that a truck hit me and I have a huge incision from emergency surgery, and the phone rings.... yes right then..... good timing don't you think? And it's my DD calling to see how I am. I started crying horribly, the nurse had to stop and leave and the baby was crying right along w/ me as my tears are soaking him. That was not the time or place to rekindle our relationship as I was not mentally, emotionally, or physically feeling up to it as you can well imagine. I called my DH, we unplugged the phones and had guards at my door to keep any unwanted visitors from entering and disturbing me during such a trying time. They called over and over and over again, couldn't get thru, called the nurse's station, the nurses would come in to check my phones... I thought I was being stalked and my DH and friends were doing everthing to protect me from the pain they inflict and the memories they brought forth of being rejected many years before. They really were worried about me, but that wasn't the time to approach me.
2 months later, after many discussions w/ my grandmother and aunt on this matter, the surgery is healing nicely, my hormones are leveled out, and I make the decision to invite them to my home to meet their grandchild. They did, it went well, we talked about the small and insignificant lie that caused the whole mess, couldn't believe it caused the whole mess, and decided to talk directly to one another for the future rather than deal w/ hearsay. For the birth of my 2nd child, my DM and DD moved in w/ us for a week to take care of Tristan while I was in the hospital. We seem to be healthy and strong, but I only let them in so far now. I'm too afraid of going thru that pain again and so I keep them at a distance now. I am a much better person having them in my life, but I couldn't make them love me. I feel I was meant to go thru the pain of those times to make me a better mother and a less dependent person. You sound like you are very strong and independent and so I am sure there are different reasons you are dealing w/ this situation than I. Maybe this will give you and your DFiance a very deep connection that no one will be able to break ever. That's what happened to my DH and me. But know that you will survive this, and I know that your DD will someday regret turning you away. Hopefully, he will realize this regret sooner than later.
I pray for you and I send you much strength and good will. Just know that others have gone thru difficulties w/ their parents and have gotten thru it. I am so much stronger now and I have so much love to give. Your situation will get better in time, if not w/ your DD, then w/ your DFiance for going thru this w/ you. And hopefully, your children will have the pleasure of knowing their grandfather someday. And if not, then it wasn't meant to be because if he is not better, then you don't want your children to experience conditional love. This minute "I love you." The next minute "I don't." You want your children to feel you will and their family will love them always and forever no matter what they do or who they become. If your DD can't give them that, then protect them from him. But you at least can learn from this and love them w/ all of your heart no matter what. That is what you take from this difficult time.
Sorry my post was so long..... Your experience brought back all of these memories and affected me so. I wanted to let you know you are not alone and those of us on the DIS are supporting you and sending lots of love and good wishes your way. I hope you and DD can work things out soon.
Needing to vent, hope you guys don't mind. Tonight was really bad, I've finally come to a very harsh conclusion in my life regarding my relationship with my father. Here is some background. I was always Daddy's Little Girl, we were very close, he was the stay at home "mom", I've got so many good memories of my father, etc. In 1996 my parents seperated, due to my mother choosing a different lifestyle, well my father apparently was very bitter about this. I moved in with him 2 months later and lived with him until 1999 when I moved in with my DFiance. During this time he fought my mom for support, custody of my younger sister, which I at the time agreed with. Infact I spent all my time during High School cooking, cleaning, shopping, paying bills, doing his taxes, etc for him so he could take me and my sister, I lost my childhood because I wanted us all to be together. However she won the case and my sister moved home at the age of 14 and has lived with my mom every since. I've never done anything wrong to my father, unless loving him was wrong, I was a good daughter, etc. The only gripe he has with me is that once he paid a bill for me $100.00 and I have yet to repay him, HOWEVER it's been 5 years since he has spent a holiday with us or birthday... I feel this debt has been repaid 10x's over. 
So I guess in conclusion I have to "write" him off and not do this to myself anymore.
