We've got an aunt who can't bear to let go of an animal. She'll spend whatever it takes to keep them alive - even when they've lost control of their bowels or bladder, have to be carried up and down the two steps to go outside, even when they've gone deaf or blind and all their teeth are gone, even when they dont seem to know where they are anymore. She's put them through chemo and amputations and given them more meds than a human in their twilight years takes. It breaks my heart to see a happy active dog reduced to a shadow of their former self because she can't bear to let them go. Sometimes modern (veterinary) medicine keeps them alive much longer than they should be, and I agree that some vets will keep them alive because of the tests they can run and they know their owner can't bear to say stop. I think it's a travesty. I kind of liken it to people who don't want heroic measures to save them - animals are not people - they don't have the same thought process as people, they deserve to live their lives with dignity and need to have their lives end when a dog's life would end.
As far as this dog goes, I'd have a round of blood work done, if it's normal, talk to the vet about whether the dog would benefit from Aricept (sp?) or what else might be causing the behavior. It might be that the old dog is confused, suffering from dementia, or just likes the quiet and the temperature under the bed. It's good to know you've talked about the end with your daughter.