Given the intertwined natures and dependencies of the people involved in this, I doubt there is a definitive answer to this one. There are a number of complicated relationships exposed here, so I'll try to be as objective as I can. Please excuse me if I cause any offence with what I write, it's not my intent but it is necessary to understand the problem before it can be addressed.
First off, are you the only one who has a problem with this arrangement? It's possible her father may like being the guy that she calls on and may enjoy caring for this grandchild.
The reason I ask is that if he's happy with it, then the problem lies between you and him. You're uncomfortable with the demands being made on you and you both need a find a way to make things better. If he is genuinely uncomfortable with things, then the issue is between him and his daughter, which is a much harder knot to unravel. After all, few men would be willing to tell their daughter that they're not 100% willing to look after their grandchild.
He's unlikely to ever stop supporting her but he has a responsibility to you as well, so make him remember that.
If you want to have any success, you need to understand his perspective on this. You're asking him to provide less care and attention to someone that he's looked after for the last 35 years. That's not something you can easily change.
Before tackling the hard stuff, there is a quick and simple thing that can be done to mitigate the problem a little. It's indisputable that a child may worry when their parent is missing. As such, your daughter in law has a real responsibility to keep you informed of her plans and update you when they change. That way, should her child ask, you don't have to say that you don't know where the mother is.
It's a reasonable request and I don't think your daughter in law would be able to evade that responsibility without losing whatever moral high ground she thinks she has. This neatly uses the parent-child dynamic on her, as she's using it on her father.
Now at least, you should be able to have a line of communication to her when she's out and can gently remind her of her responsibilities. "Your son/daughter needs to get up for school in the morning, don't be too late home."
Obviously, I know nothing about your financial situation, so I'll just wade in ...
Kids sometimes lean on their parents for money. (I say this more in hope than in knowledge, as we've recently had to borrow money from my wife's parents. All paid back now, in my defence)
As I've said above, I don't think you could stop your husband from wanting to help his daughter. There're just too many emotions tangled up in that relationship. What you -can- do is to make your daughter-in-law aware of the consequences. The money doesn't just appear out of thin air, it comes from a finite resource.
Start tracking (or pretend to start tracking) your finances on a monthly basis and ask that your daughter help out. If she thinks she's going to need money, could she please ask for it at the beginning of the month? Say that it'd really help your financial tracking. It's not likely to make her stop asking but again, the awareness that someone is actually paying attention is often deterrent enough.
If getting money is too easy, people will ask for it without thinking. This is, after all, how credit companies work.
Don't try and fix this overnight, or in one push. You need to gently control this issue over a period of time. If you try and force the issue, something is likely to break.
And as a last point, remember that the key to this is your grandchild. Both your husband and his daughter will want what's best for the child, so if you need any leverage, it's there.
That sounds more callous than I had intended. :)
Good luck and I hope it works out for you all.