Nowadays it can be possible for an adopted child to continue to have contact with their birth family.
My personal opinion, and it is a personal one, others will disagree, is that unless someone else in this girl's birth family can step up to the mark, then it is probably best the child is adopted.
I think it way beyond acceptable for your husband, let alone his extended family, to expect you to give up your life to bring up his grandchild, where you are so new to the family and your marriage is so young and where his (and their) input into raising the child is obviously going to be minimal. As others have said, your step daughter's life is obviously chaotic and this child may be followed by others.
I think, no matter what decision you reach, it is going to be a make or break decision for your marriage, which is a tragedy. On the other hand, if your husband - and his family - are behaving with such little respect to you in this matter, the earlier you find out the better.
Frank Field, Labour Peer has died, aged 81y.