I have a perspective, that could be different for you to consider.
"What can I do to tell him that it is not acceptable to do this and that it doesnt even work?"
Not acceptable to whom? Clearly, your Dad thinks its fine. Perfectly acceptable, or he'd not of done it so openly, with witnesses, not least of which, gleeful sister.
You have a choice, leave him elsewhere, or accept, that this sort of 'training' does go on, for the vast majority of dogs lives. This is the standard treatment for "house training your puppy as handed down for generations'. You choose to think differently. You act differently, and i agree with you, this is wrong. However, its his way, his house, his persona, is he REALLY going to change? coz my Dad wouldnt.
As for your sister laughing gleefully, yep, that's what my sister would of done. And yes, that's what my children do to each other. Its all perfectly normal in my family too. Other may have a different home style. Not better, not worse, just different.
I live in a house. I have a husband, that will rub a dogs nose in it. No matter what i tell him, he doesnt take it on board. He did it with our previous dog, he's now done it with Bernie. Not only that, but he teaches him to do things differently to me.
Not only is he treating the dog differently to me, but so are each of my 3 children. So our poor puppy, has to learn not just my training, but the specific styles of 4 adults, and one teenager. Each of us, with different expectations of him, different boundaries to stick within. As did our previous dog. And dogs cope fantastically.
My last dog would happily sit on MY sofa, next to my adult son, playing an xbox for hours. Id come through the door, and the dog would slink REAL fast to the floor. He knew there were 2 sets of rules. My daughter would have the rottie on his hindlegs, 'dancing' with him. I would never allow him to jump up, he'd jump, but his feet would never connect with my body. 2 sets of rules again! Do you see my point?
The dog will obey a pack leader, its not that bad a treatment to receive. Its not good, dont get me wrong, but it wont end up a gibberring wreck from this of its own. If the dog likes your Dad still after this, and wants pats from your Dad, then your Dog aint stressing, so you dont need to rock the family boat on this front.
You could ask him to let him out regularly, and keep all bedroom doors shut. Or if too occupied to watch the dog for signs of needing to go toilet, to lock him outside. Where accidents 'can' happen.