Hi,
The courts will say she has no stand for stopping him seeing the kids just because he has stopped payments. She needs to go through the CSA for claiming money for him because they will take him to court if he stops paying maintenance - be warned thou if he is not working they will not make him pay a penny. with regards to the access situation your daughter can put in a court action if he does take it to court that they are supervised visits so that she has main control over when he has access. your grandson was born after sept 2003 meaning the father can petition to have himself put onto the birth certificate therefore gaining equal parental rights. the only thing i can suggest is that your daughter speaks to citizens advice people or a solicitor. if she is on benefits she can get this through legal aid and they can advise her better and then decide whether it is worth taking him to court to stop access before he does it too her but be warned that the courts dont always side with the mother even if there is reasonable grounds for otherwise.
Good Luck