AIO Wife and Dad got into a fight, she refuses to accept his apology

Hello, some relevant background info. My wife has her own traumas and issues and is uncomfortable with confrontation, men, and specifically my dad as he tends to dominate convos, be strongly opinionated and can be offensive. My dad is a boomer, means well, does well by his family, but does make off colour comments a fair bit, there’s a bit of “that’s just him” type of response to him. He’s been called out by people, usually my mom, at various times for crossing lines. My dad has gay friends, and and accepts gay people but still makes offensive comments occasionally, and is confused by trans people. I say that as a scaling for his level of boomerness. Overall my family communicates well and issues don’t persist much. It’s evident my dad loves my kids more than life, and consistently cries every time he is with them, and it’s been 4 years since we had our first.

My wife and our kids were staying with my parents while visiting other family. We were all at my brothers house. Our 2 yr old son was playing with his sisters dolls, and my dad made a comment about getting him a “boy” toy or something instead. I said if that bothers you, he was wearing his sisters ballerina tutu and “gabbys dollhouse” ears the other day. He said, “well that’s how you raise a little f**” my wife immediately exploded and said something along the lines of “don’t. I’ve told you I don’t like that, my cousins gay so don’t. And so what if he was, you wouldn’t love him?” And was visibly upset. My dad told her to relax and she said, “no I’m sick of you doing this” and he says he has gay friends she says it doesn’t matter and storms out for the night.

Dad was upset she stormed off and didn’t talk it over. I defended wife saying no he clearly offended her and then doubled down. She didn’t want to stay and fight in a way that made her uncomfortable, especially to him. I told him he owed her an apology and to not talk like that. He sent a short apology, she effectively didn’t accept it. Things were tense for the last two days of the trip.

We’ve been home for a few days. On the drive back my wife made comments about not letting him around the kids anymore. I let her be angry and figured it would blow over. No communication between them for a few days. Last night my dad, in a somewhat out of character fashion, sent us a long sincere and heart felt apology over email. Owned the whole thing, apologized, stressed his unconditional love for us and the kids, discussed his love for my wife and wishes to not let his comment ruin our relationships. I felt it was a good apology.

I got home from work and wife made a comment like, “did you see the apology? Whatever, great, I don’t accept.” And then ended the conversation.

I don’t know what to do. I’m annoyed she’s refusing to accept his apology. This is an immediate family member, we have a very close relationship with them, we see them multiple times a week, they help a ton with us and the kids, my daughter has a sleepover with them once a week. What he said was over the line, but he’s apologized twice, the latter being very sincere. I’m obviously not okay with cutting my father out of our life over this, nor am I okay with keeping the kids away from him, or him away from my kids. I don’t know how to get my wife to let this go. I understand she’s entitled to her feelings, but at what point do you let things go amongst close family.?

AIO for being annoyed at my wife here?

TLDR: Dad made offensive comment about my son. Wife is pissed at dad wants to keep us and kids away. Dad made long heartfelt apology. Wife refuses to accept. I’m annoyed at my wife now for not accepting.