I read those parts of the diary. The girl doesn't even remember clearly, and was just wondering to herself that she might be some kind of victim. I'm surprised you guys didn't pick up on that.
How old was his daughter at the time? As long as the father isn't a perve, I don't see anything wrong with up to 4 or 5 years old, if it's the child's idea. Most kids taking a bath/shower with their parents. It's probably a very healthy thing to do and actually un-sexualizes nudity which seems like a good thing to me.
Fathers in Japan bring their small kids, both boys and girls, into the men's side of public baths/spas. It's a little shock to the psyche to see a strange little girl running around nekkid and laughing in a girly voice, but nothing wrong with it.