Kathy,
Denise is right - change can cause a lot of frustration and interrupt the peace and harmony within a home. My mother has dementia. She is in the moderate stages. Routine is paramount in keeping her calm. She also prefers the "familiar". This means that she might want the same food for each meal and wear the same clothes day after day.
When I went home for Christmas I had intended to sleep in the guest room. The guest bed is where her dolls sleep. For me to remove the dolls and sleep in the bed would have thrown her into a total anxiety state - and literally ruined Christmas. Instead of trying to reason with her or insist they be moved, I chose to sleep on the sofa. I have found that instead of trying to "change" her - you have to be the one to change your habits. Keep things simple and familiar! If you move things around, especially the familiar items you may be relocating an anchor that is allowing the senior to function as well as they are on their own. If the dolls you mention that were your mom's are a comfort to your Dad, then by all means he may need to have them out. You may be surprised, however, the things you think sometimes have significance in their lives, are now meaningless, and some things that appear life and death will seem very odd.
You are so correct in that this is a very cruel disease. It is also difficult for the family to understand how the mind is now functioning. Personality changes, behavior changes and even expressions are different. My advice is if sometimes gives him JOY, it doesn't matter what it is - why not a hot dog for breakfast? This is why Assisted Living communities who specialize in memory care provide a nurturing environment for seniors with dementia. They kinda shrink a large complex world into the simplest form that provides routine and allows the resident to function as independently as possible. Once you simplify life to the basics and support what someone can no longer do for themselves, you will see a "glimpse" of the loved one you remember.
I wish you and your sister well in your journey with your Dad - try to keep a sense of humor - you will need it!