Wow, what a horrible situation.
I have never been in anything close to your situation so I can’t offer advice. The only thing I can say is to trust your instincts if you think your child’s father and step-mother are bad for her then cut them off.
What I have seen is some of my kid’s friends where there was one responsible parent and one irresponsible parent. In every case, I can think of where the responsible parent ‘did the right thing’ by letting the child go to the other parent’s house for visits the child had more problems later as a pre-teen and teen then the ones where the responsible parent put their foot down.
Right about now I am feeling fortunate that my divorce didn’t happen until all of my children were over twenty. Dealing with this type of thing with children as young as your daughter has got to be paralyzingly tricky.
Good luck however you decide.