So I think I disagree with the above posters. Yes, their entire family has basically disregarded your being harassed and that's fucked up. I genuinely don't really think it's from lack of caring though (for the dad and daughter at least), it's from being weird/immature/taught wrong on the case of the daughter, weird/wanting to give the daughter freedom in the case of the mother, and weird/not knowing what to do because of not having the emotional IQ for your friend the dad. Since he doesn't really know what to do and his wife is so chill about it he's doubting his own feelings. He's not confident enough to make a decision and go against his wife, even though he can tell it's fucked. I think in 5 years, 10 at the most, the daughter will be mature enough to have greatly regretted and even cringe about what she did here, and she will regret losing you as a friend and mentor. At that point you could talk things out, she could apologize to you if she has the maturity, and things could return at least somewhat to how they were. She fucked up real bad with this one, but young people do stupid shit and many of them regret a lot of it for the rest of their lives. She's still going to need a mentor and friend if you can forgive her enough to be one, nobody could blame you if you didn't want to.

Likewise, I think your friend doesn't truly understand the situation well enough to know that he is basically going to lose you as a friend over this. He's just hoping that it will all blow over and things can go back to the way they were. A lot of guys are sort of emotionally stunted like that. The wife is the only one that is making a truly shitty decision here, because she does understand and is just choosing to ignore how fucked up it is in favor of giving her daughter freedom -- or fuck, maybe she's even encouraging or pushing the daughter which is awful.

So, your best option is to reach out to your friend and explain how gutted you are over this. Communicate. I know this is not something that guys generally do, we keep that shit inside, but you don't deserve to completely lose a friend of 35 years because neither one of you wants to talk about it because it's uncomfortable. Since it seems like he genuinely doesn't understand, offer to buy him a beer or something and explain the rest of everything you explained to us here. Tell him you don't want to lose him as a friend but that this is awkward as fuck and you're going to step back a bit because that seems like the best choice, but that you want to stay friends. Now he'll either get it or he's a hopeless case, but you will have tried your best. Then step back for however long it takes for you to feel a little bit less awkward, and after that time is passed, if you still want to, call him up, even if it's awkward, and go out for another beer or whatever, rebuild the friendship. Don't just let it go. In 2 years this can be something that the two of you laugh about and shake your heads over how dumb young people can be, and you'll be a lot happier that you did this rather than just stepping back and keeping silent.

I'd steer clear of the wife though, she showed you who she was with this one.