I will qoute one of my favoite lines from "Walk the Line" (story of Johnny Cash and June Carter Cash who had a blended family) to you. When June was hesitant to marry Johnny because of the issues with his family, her famil and their kids from previous marriages John says, "Baby that stuff will just work itself all out". To which June snipes back, "No it won't! That's the sort of stuff other people work out for you and then you think it worked itself all out on its own". So unless your dh is willing to "work" on it. Really work on it. It IS NOT going to work itself out on its own magically.

Maybe it's just me but I would never step aside for step adult to have a relationship with my children' while excluding me. From my own experience this could result in your children getting hurt down the line. In my case BM showed up every time my bios were at sds home. Had I known or suspected this I would have halted contact much earlier because I did not want my bios exposed to this wicked vindictive woman. The step adults are free to have whatever relationship they want with their father but there is no way I will ever let my bios be entrusted to the care of someone who openly has expressed jealousy of my bios and hatred for me.

I tried it, it failed, and my bios paid the price unfortunately. I regret ever trying to have them involved in my bios lives.
Before I get flamed for this response please keep in mind that I am every bit as protective of my own bios as the BMs that we refer to are of theirs and I have every right to be so as my steps have showed a very ugly and disturbing side that indicates that they could be a potential threat to my bios.

Wow, something I have a little experience in. I don't know the specifics of your relationship, so please, take that into account.

Try putting yourself in the SD's shoes. She gets to see her dad and she misses him and now he has this other person that gets his attention whenever she's not around. She also has to deal with the fact that there is no turning back. Her old family dyynamic is gone and you are proof that it'll never be the same again.

It's difficult for kids, who never really seem to see the broader spectrum of things past what they want, to accept the new reality.

Your DH is half right, half wrong. Things CAN work out, but HE'S the one who will have to find the way to make things more cohesive. He needs to talk to SD and tell her that you and your bios are just as much a part of his life as she is. He needs to reassure her that he is still her daddy and that'll never change. He has to also explain that she shouldn't think of you or your kids as replacing her or her old family. No one can or ever will replace what was, but that she has the opportunity to be a part of this new family that he has created with you. He needs to include you in all activities and bring you in on the conversations.

You really can't do anything but push him because you telling her anything will only push her away even more.

How old is this SD?

Just remember - there's no one answer for all families.

I know a couple of families where everyone - steps, new spouses, adult children all socialize together a lot. If it works for them so be it. Would never work for me but who am I to say it doesn't work for them.

I know intact families where the adult children see their parents maybe once a year. Other families are up each others ass constantly - like everyday. If it works fine.

Hell I have a cousin who married his ex wife when her daughter was an adult. They were married about a decade when she left him. Her daughter still comes to our family holiday gatherings not her mothers. She's a lovely person, and I consider her and her son family.

No one has to have a relationship with any toxic adult. Nor should they put their children in a position to be hurt by toxic people. "Blood" means nothing.

I would never dictate that my DH cannot see his son just because I don't enjoy being around him. But I had a hissy fit when my DH saw him on the sly. Lies of omission are just as bad as outright lies.

I don't need to know where my DH is every second of the day but when I asked him where he was going he just said "the west part of the city". Not a lie but totally evasive. He had to do that to keep the peace with his second wife. I had absolutely no problem with his going to go have dinner with his son, but I hated that evasive crap.