God, what an awful situation to be in. I would be beside myself with worry and anger. Unfortunately there is very little you can do as she is 16. I think you should keep talking and 'tolerate' the situation rather than accept it; unless of course you find he has any sort of record!
They will face a lot of prejudice and this might make your DD think twice about this relationship once she goes 'public'. He will inevitably lose family and friends over this, which might make him think twice about the relationship! She may well grow out of him too - a clandestine, forbidden relationship is so much more exciting, so perhaps once the dust settles, it will seem a little bit mundane.
I would keep talking and listening, but I would explain for now that it has been too much of a shock for you to start accepting him and visiting his home. If he really loves her, he would be happy for her to live at home, finish her education and leave home at 18. Why not suggest this as a compromise? If they are still together then, you might have to give the relationship your blessing, or risk losing her.