I don't exactly know the laws, but that doesn't seem fair. Have you ever seen Gilmore Girls? One of the characters, who is engaged to another, finds out that, after breaking up with a girlfriend, 12 years earlier, she had a daughter, who was his. He was able to work out an agreement that they could spend time together, but that was it. No name change or anything. But recently, the mother of his daughter decided to move across the country, which was huge. His lawyer said that if he didn't have a presence in her life, fighting for partial custody would be somewhat hard.
Now your husband's girl is just one, and this girl was 12 or 13. So the presence thing may not apply. But, you may be able to work out a partial custody agreement, or at least some visitation rights, without going to court.
In the mean time, talk with your husband about the relationship he had with his ex. Were they engaged? Or did he somehow do something that offended her or her parents? There's got to be some reason that his ex and her folks are soo strict. And I'm really not insinuating it's your husband or anything, so you should also ask about her, and if there was anything restrictive or somewhat uncomfortable with her that might be causing this rift between your husband and his daughter.
Finally, do you actually have proof that there is a real child? Pictures could be forged, as could legal documents, and if she was on the verge of broke, this is all a consideration. I definitely wouldn't consider this, though, unless you were positive that something was up.
Having a child and being a parent is a wonderful experience, especially if your husband is the actual parent of the child, which he is. Make sure you help him take adavantage of this opportunity.