this is what I would do if I were in your sitch:

Do/say nothing until she turns 18. Completely disengage. She's already 17, so it's not like she's going to miraculously change overnight. The day she turns 18, the rules change, BIG time. The first instance of trouble, disrespect, etc., she is told that she has one week to find another place to live, graduated or not. At 18, she makes her own bed and will lie in it. Her future is in her hands and she needs to guide her own destiny. If she can contain herself, she can stay. She will need to help with the household chores and contribute to running the house. Otherwise, I'd just stay out of it. Getting involved will only make everyone more upset, which is what she's looking for. Don't give her the satisfaction.

I personally would tell your dh you will support what he thinks is best but to please consider all peoples feelings , not only his daughters here. Since she is still under 18 , she cannot move in with friends. She is to move with the grandparents if she is to leave the house. If she stays till june, then its under strict rules. But considering how she behaves, i would ship her off to grandparents. if your dh feels guilty , tell him not to and that he is doing the right thing and it sjust another guilt tactic by daughter. I think the daughter should be sent to grandparents for the sake of your marriage and when she is 18, she can do what the hell she likes but make it very clear, she's on her own. No moving back in unless she is a responsible , respectable human being.