Hopefully they don't intend to act this way, it's just a byproduct of their own codependency. Maybe one day they will wake up and see the damage they are causing to SD (and you for trying to protect her), but probably not. They are trying to make sense like everyone else is, but they are definitely doing it inappropriately. They probably don't realize that they are losing SD too.
She will make her own decision when she is old enough, and I think it's pretty clear right now what decision she will make. She should never have to feel that she is responsible for something like this at her age (at ANY age), especially when she is not even capable of understanding the depth of the situation. If they lose her, that is their fault-they have to be held responsible even if they ARE codependent and that is the sole reason that they act the way they do.
I think you are doing the right thing, and I think she will appreciate it when she gets older.