Your FIL is a troubled man. You've certainly established that. He's trouble. Doesn't matter what he does for a living, how much money and prestige he has. You've escalated it, obviously, and now it becomes very hard to save face (for either of you) or avoid a further escalation.
One option is for you to try and make peace by asking him to join you for a drink somewhere and telling you a little more about his dream. He's had this dream of holding his grandson first? What's that about? Where did it come from? It would be good to know.
What you've wisely figured out, quickly, is that this demand is merely the first of many. What I find astonishing is the man's selfishness. It's as though he doesn't quite understand the meaning of "giving his daughter away"--which is what the wedding ritual is about--and doesn't really value YOUR presence in the family, and in his daughter's life. That's chilling. Standing in your shoes, I'd be astonished and shocked.
I think you're making a mistake not to get your wife involved. She may be the only one who has the power to shift this in your direction. What does she think about her father's demand? Does she think it's justified? Is she willing to speak on your behalf?
If you've got a loving partnership with her, it's important that you bring her into the discussion. Otherwise you're actually doing what your FIL is doing: you're treating her, and your future son, like an object to be struggled for, and you're acting as though this grievous struggle is something she should have no voice in. You're wrong about that.
But here's the problem: What if you raise the issue with her, and she sides with her father? Where does that leave you?
Some spiritual traditions might urge you to calm your troubled heart, breathe in some good loving feelings, and bless your troubled FIL with the moment he so richly desires. That's a tough row to hoe, but it's there for you.
I think you're better off bringing your wife into the equation and seeing how she feels. You need to know the truth about THAT right now. That's the manly thing to do, in fact.
As for threats of lawyers: what a mess!
Talk to your wife, man. Your FIL is engaged in some very severe triangulation right now, leaving you feeling excluded at the very moment you should be feeling wonderful.
What's obvious, the moment I put it that way, is that your FIL isn't just egocentric: he's scared. He's terribly scared that his daughter and you are creating a family that feels somehow apart from him.
So what's the prelude to all this? You're not telling us something here. Surely your future FIL gave off some warning signs quite a bit before this incoming diaster. Do tell.