Please understand that I am coming from a perspective of having lived with a very abusive parent. I do not know if your daughter’s situation is like mine, so what I say may not apply to her.
That being said –
What I wouldn’t have given to have had a mother like you. It is very clear you care for your daughter - that alone will carry your daughter farther than you can imagine.
It is hard to give advice. With my Nparents, a lot depended on the situation.
How bad is he? Is it the mind games only, or is he physically, emotionally, and/or verbally abusive?
Ultimately, has your daughter indicated what she wants out of the relationship? I know this may sound like an odd question, but, if she is looking for a real relationship, if she is looking to fix the relationship or him, if she wants to be treated with courtesy and respect, or to otherwise have a normal relationship him, this is not likely to happen if he truly has N’ism. She needs to be aware that he has a disorder that he can’t control and that the craziness that comes out of his mouth is his not hers. It is very important that you teach her not to own his insanity. Chldren tend to do this by default - they blame themselves rather than the person who is really responsible.
I found that the only way to have a relationship with my father was to never, ever disagree with him, to cater to his ego at all times, and to never, ever, ever show that I was able to do something better than him. If I did these things, then, at best, I could survive relatively unscathed, although, it didn’t always work. If I did not do these things, then my life was made miserable. Sadly, it is a sham of a real relationship, but given his disorder, and if it truly is N’ism, it is likely that this will be the only type of relationship your daughter can get.
Sounds grim doesn’t it? Unfortunately it is. The very good news is that she has you. You are the balance that will tip the scales in her favor. She will not spend half a life-time (like me) wondering what was wrong with her that her father couldn’t love her.
I might also see if she would be willing to consider speaking with a therapist who is well-versed with this disorder, he may be able to give her some insight on how to deal with the situation.
Peace