Bug-Eyed Buzzard

Our next-door neighbor and his wife constantly give us and our three daughters gifts and sweets: every holiday, every birthday, EVERY occasion, and sometimes just because. This seems really sweet but there have been a few red flags for me (with the husband).

Here are the red flags:

1. He told my two older daughters that they "look so pretty" one day.
2. He told my oldest daughter, when he and his wife were giving them dresses that he wanted to get a picture of them in their new dresses (they said they had gotten them for their own granddaughters but didn't fit them). At this time his wife also mentioned that her husband loves letting his granddaughters play dress up when they come to his house and that he used to have a whole closet full of dresses for his granddaughters when they would come over (they are not his biological granddaughters).
3. He just wrote an e-mail to us last night telling us his wife is anxious to give us more gifts and wondered why we haven't been returning their messages in "a kind way".

We know we would never leave our girls alone with them; that's easy, but it's just the gifts that keep on coming and the constant phone calls. My husband is really cautious (Mr. Steady) and doesn't want to hurt his feelings or "rock the boat" but I want to march on over there and ask him to never say things to my girls again like "you look so pretty" and "make sure I get a picture" again or we're going to have to cut off contact with you. It's been a little over a year now and this is something we have to face regularly. They do go out of town a lot and we have always watched their house for them so that seems to be the reason they are so nice. I feel so helpless in this situation and don't know what to do because I want to be submissive to my husband and not "rock the boat", just keep acting like everything is fine, but it's starting to give me nightmares. Do you think I'm reading too much into it or am I right to think this way?