H.W.
You need to get your child out of this situation right away. Your child care provider is not adequately protecting your child, nor is she effectively disciplining her grandson. And you are beginning to teach your daughter a very dangerous lesson.
It is misguided to suggest your child bite another child to teach them to quit biting. "If you get hit, hit'em back harder" only creates an environment of violence.
We should never, ever instruct a child to hurt another person in lieu of the adult's adequately parenting. It is the caregiver/adult's job to manage this situation, and your three year old daughter should not be put into the position of having to resort to violence to protect herself.
Please look into some Love-and-Logic classes. They take a no-nonsense approach that might appeal to you. Know, too, that by encouraging your child to protect herself by hurting others, you might likely be teaching her how to get kicked out of grade school in later years. Now is the time to change that.