and advised that he evict us
Was this the police officer advising that? Generally the police limit themselves to just ensuring the immediate incident is resolved or at least calmed down enough so they can leave not expecting to return.
and take out a physical custodial order for our 8 year old
I'm thinking the only basis for him to be told he ought to have physical custody of your 8 year old is because of the troubles caused by your nearly-adult other daughter. Within a year she will legally be an adult. I don't know all the particulars of your situation or whether stbEx-fiance might succeed in gaining physical custody but it may be that you'll have to tell your then-adult daughter she'll have to establish her own residence so the parenting of your younger daughter isn't put at risk of being reduced.