Damon van Dam, 36, said police asked him what had happened in the garage of his home that night when two friends of his wife, Brenda, arrived before a "girls night out" at Dad's Cafe in Poway.
The father testified that he initially didn't tell authorities that he had taken "a puff or two" from a marijuana cigarette the women were smoking.
"I didn't think it mattered and I didn't want to get in trouble for that," van Dam told prosecutor Jeff Dusek.
But van Dam said that after the officers told him they were only interested in finding his daughter, he began to be truthful with them.
He said he also did not tell police about one of his wife's girlfriends, Barbara Easton, coming into his bedroom that night after returning from the outing.
"When they told me it was absolutely critical to know what happened that night, I told them everything that happened that night," van Dam said.
He said Barbara was on the bed with him, above the covers, for about five minutes as Brenda first went to the bathroom, then downstairs.
"I kissed (Barbara), snuggled her some," van Dam said. "I think I put my arm around her and rubbed her back."
In his opening statement Tuesday, defense attorney Steven Feldman said that initial lies from the van Dams threw the police investigation off track.
Much of the morning testimony in the David Westerfield trial Wednesday was designed to orient jurors to the layout of the van Dam house, by using a floor plan and photographs.
Van Dam described the upstairs hallway that led to bedrooms, and also told the jury of six men and six women what was in Danielle's room. One of the issues in the case is whether artwork posted on the doors of the bedrooms would help someone know which room would be hers.
He added that each of the children's rooms had night lights, but Danielle's was burned out, so he opened the drapes to allow light from the street into the room.
Shown a photograph of his daughter's door, van Dam began to cry as he described why a dog gate had been placed there.
"I asked that the room not be cleaned," he finally explained.
Earlier today, Dr. Norman "Skip" Sperber, a forensic dentist, testified that four of Danielle's teeth were missing when he examined her mouth.
One eventually was found "way in the back of the mouth, where the gum meets the cheek," he said.
Under questioning by Deputy District Attorney Jeff Dusek, Sperber said it is not unusual for teeth to fall out during decomposition.
The child's body was found near some dumped trash and under a tree off a road in Dehesa in East County.
However, no teeth were found at the scene, Sperber said. He explained that animals, who sometimes carry away human remains, normally do not bother with teeth.
In opening statements, the prosecution said the loss of teeth showed that Danielle could have been suffocated.