Well... on the one hand, I certainly don't think you're the @sshole here. NTA
But of course, the father is ultimately the parent here.
So it's HIS kid--not yours!
Thus, ultimately he and his wife are the ones who get to decide what toys the child will play with, or not play with.
Whether you agree or not, I don't think you can really try to force someone's child to play with a toy the parents don't want the kid to play with.
On another topic: if the parents are actively-directly teaching the child hateful ways, then sure: you certainly have a right to be concerned, and talk with them about it.
But... if it's just a case of an older generation guy being uneasy with his male child playing with dolls... then ok, that's definitely not great, but it's not the end of the world!
My Dad was a bit uneasy with me playing with Barbie dolls with the girls next door when I was a kid... so he bought me a 6-million-dollar-man doll! (It was the 70's!).
But he was/is an awesome Dad that worked so hard for the family, and helped us so much, and was very understanding. He always taught us kindness and understanding of others.
But still... being the generation he was... he was a bit uneasy with boys playing with Barbie dolls...
Again, it's a fault... but it's not the end of the world.
So... in the end...
I personally think you over-reacted a bit, and turned it into a big federal case, perhaps... maybe?
I guess I'll get badly downvoted for saying that.
But... I mean does the punishment fit the crime here? Total ostricization from the rest of the family at Christmas?
I don't know, if it were me, I'd much rather want the family to be together at Christmas and wouldn't see that one thing alone worth breaking up the family and creating such a rift at Christmas time.
I'd still want to be with them at Christmas and just make jokes about the whole doll issue, and try to talk with the Dad a bit... let him know an alternate viewpoint, without sounding like I was lecturing him about it.
I'd probably just rush out and get the kid a cool new toy, that the kid's parents approve of.
In the end: the method you dealt with it, is certainly not going to win him over to our point of view on this issue any time soon!