As a parent I completely understand the worry that parents have that the world outside the home is a big scary place. I believe that the way to prepare children to live in such a word is through age-appropriate education, not isolation. It is one of your responsibilities as a parent to be knowledgeable and to be able to intelligently discuss these things with your kids within the framework of your beliefs.
Totally shielding children from being aware of how the world really operates is only going to lead to adults that don't know how to accept and live with people different than them later in life. Teaching your kids about other people that are different isn't indoctrinating them to be different; it is equipping them with important life knowledge that they'll need to understand that the world is a very diverse place and that there are many kinds of people in it. And hopefully such teaching helps kids understand that even though some people are different they still deserve basic human respect.
It is unfortunate for his kids that this fearful father bought into the bathroom lies hook, line and sinker.