First, I am so sorry for your loss. I can imagine that this is very hard on you and my heart goes out to you and your family.
I totally understand the reasons behind your wanting to give her this name, however I think you may have your answer and not realize it. You say that you think the middle name is "generally unused, or just an initial, and no one would ever really have to know if she chose not to tell people". If you feel that this is so important to you, how would you feel if she did in fact not want to tell people? How would you feel if your name were something you felt should be hidden? Also, how would you feel if your husband were insisting upon a name that you truly disliked or felt was inappropriate?
I don't think you should do away with your idea all together, frankly I think "boys" names for girls can be quite charming, such as Michael. Did your father have a name he particularly loved for a girl? Was there a girls name he truly wanted for you, but your mother had not cared to much for? That may work wonderfully for a middle name, and really honor his spirit. Also, a femnine form of your fathers name could be effective in honoring your father, soothing your wishes and keeping your husband happy, such as Denise.
Lastly, would your father want his granddaughter to have the name Dennis? Even as a middle name? My mother has a beautiful name, however when my brother's daughter was named for her she was horrified and her first words were, "you CAN'T call her that!". As a result my niece is called by a "nick-name", and my mother feels awful for her reaction. Honoring your father is very admirable, and I understand completely, so take into consideration what your father himself would want in this situation, as he may be the first one to say "no" when you were to bring it up to him.