Charles Helliwell's Answer:
I'm afraid that blood is thicker than water, Alison. Your honesty and integrity in attempting to deal with this situation in the same way as you would expect to be treated in return, has now placed you in the uncomfortable situation where your only realistic option is to exit the company.
So, now you have to ensure that you are able to exit in your own time of choosing to a job that will provide you with the opportunities you deserve and with your reputation (and references) intact. That means that you will have to swallow some pride and start rebuilding your relationship with the owner's daughter, regardless of how unpalatable you may find this.
She has to become your next best friend and your strongest advocate, and the way you go about this is to start making her look good. It's unpleasant and unnatural and will stick in your craw, but remember who you are doing this for. You are doing this for YOU and not her. Your objective is to take the heat off you and give you enough breathing space and thinking time to plan your exit in a managed and methodical manner.
Making the owner's daughter look good should not be too difficult a task, from what you describe. It sounds like you are respected enough by your colleagues to be able to smooth over the cracks in her management style and behaviour towards the staff; and you appear to be sufficiently knowledgeable about the company and experienced in the job to be able to suggest ideas to her which she can pass off as her own.
Just remember Alison, that your actions now are NOT designed to help you rebuild your career so that you can stay with this company. That time has come and gone and there is nothing you can do about it. Of course, you like your job and your colleagues and you are good at what you do; and yes, you are going to grieve about leaving, so prepare yourself for the pain it will cause you. However, what you will learn from this experience is that doing a good job, or indeed, a great job, for any employer is almost never good enough; and that honesty, integrity and commitment count for nothing, when they decide that your face no longer fits.
The most common mistake everybody makes, is to believe that the quality of their work will somehow compensate; but it doesn't. You have to protect yourself, as the owner seems to be protecting his daughter by going into denial about her inadequacies.
This company will continue to deteriorate, as more and more good employees choose to leave and the owner's daughter will look for more and more people to blame for her own shortcomings. You don't want to be there whilst this is happening, as there will always only be one outcome.
However, you have been poorly treated, verbally abused and generally intimidated. Your confidence and self-assurance will be at an all time low and you may be feeling that you are both a bad person and an incompetent employee. It's all nonsense, of course. You are none of these. You are capable, competent, conscientious, compassionate and caring. They don't deserve you; and you certainly don't deserve them.
There's a better World out there and it's time for you to discover it.