whoa, whoa, whoa....I agree with everything else you say here except this:

"Spend 10 minutes surfing around mr-s-leather.com, medicaltoys.com, or christiandomesticdiscipline.com to get a taste of how much more extreme your daughter and son-in-law's interests could be. Then go sit down with your daughter and ask her to explain a bit about her turn-ons to you, because you need some reassurance that she's not being abused and that her sex life with the son-in-law, whatever form it takes, is mutually pleasurable, consensual, and rewarding."

First of all a DAD as naive as this guy will not be comforted by a trip to Mr.S.
Surely you know some tamer BDSM books, that discuss things like consent at great lengths, that you can recommend for him to read, BY HIMSELF, without his daughter being forced discuss her personal sex life with him.
Not only do I think that she probably feels violated enough that she does not need to be subjected to that kind of bizarre conversation dynamic, but we all know that if you are into BDSM, making it safe and ok for your parents takes all the fun out of it! Maybe she does like more extreme stuff. There's no need for him to know. He has no right to decide the degree of pain she enjoys.
It's bad enough already that he imagines her at the end of a dog leash, but she probably hasn't gotten a good spanking for weeks because now it somehow involves her actual DAD. ick.
I vote for him to get a book, apologize to her profusely, and never discuss the specifics of "her turn ons" with her, her mother, or anyone.