During the 320+ pages of this discussion, many have accused the MC of being a milquetoast at best. My view on this has always been that he has feelings for his daughters, but his first concern has always been their welfare and what a relationship would do to them. This means that Becca has had to drag him kicking and screaming in some cases, but if someone who views himself as a Father is too concerned about hurting his daughters, I don't see how that ever is a bad thing.
You are absolutely right about Lilly's behavior. She has been hurt, badly, by the one man she trusted, and she is holding out, hoping that he will come back someday. When she asks the "right" question and realizes that the man in front of her has been 100x more of a father than her loser sperm donor, her rapid transition in the other direction is not unexpected. That, and I think on some level she has always cared for him but didn't feel safe to let him (or anyone else) know. His breaking the news about her sad-sack sperm donor kicked down that last door.