This is easy for me to say, but I think you made the right call by refusing such a radical change. The director apparently was attracted to something interesting but not essential in the story. Had you removed the abusive father-daughter line, the script might have been a well-told horror film, but probably far less distinct from other horror films. Most likely it would have lacked the integrity of the original, and we don't need more movies that lack integrity. ("James, I really like your script, but could we ditch the love story and have everybody get saved at the end?" Weinstein made a change like this for Fanboys, and the fans of the original version objected,.)

I think Towne was right to let Polanski change the ending of Chinatown, but both versions would have had integrity. The final version reflected Polanski's view of the world, and since Polanski was in essence making the film, the change worked for the best. Of course, this perspective is from hindsight, and you didn't have the advantage of hindsight during that phone call. But still I think you made the right choice.