His comment was entirely inappropriate. Your job is to not enable this behavior. If he says something lecherous, instead of laughing, draw a line and explain that this is not something you want to hear.
That said, I think that his bad behavior is probably not new, and because you’re off and on with him, you’re more sensitive to things he does that bother you. His daughter in law probably decided to pick her battles and keep the family dynamic easy going at the expense of his perverse remarks.
I hope that helps you understand what’s going on.
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