Did he know he had a child the whole time and was hoping it would never come up? Or is this news as much a surprise to him as it is to you? If it was a "little secret" he was hiding, then you have some trust issue between the two of you that you really need to work out. If it was a surprise all around then think how you might feel if a long-lost sister that you never knew about appeared and wanted back in your life.
Either way, there is an underlying state of flesh-and-blood bond going on and previous sentiments about having or not having children kind of go out the window at this point. I have seen first hand how the "evil stepmother" syndrome can cause all kinds of problems for the partners and for the children (one side or the other or even both).
Not knowing the whole story, I, personally, would suggest thinking over the whole trust issue and if you still want to be together, then it needs to be for good and hard times. Try not to put any blame on the child or grandchild and if you are going to continue forward together then accept them completely.
I don't know if this helps or hurts the situation, but either way try not to jump headlong into any rash decisions without really thinking things through.