Do I tell my Dad he has dementia?

No, you can't tell him in a way that would make him understand. You absolutely did the right thing getting him to a safe place. Once they leave reality, they have no desire to return to it. The pleasant delusions allow them to make plans based in fantasy where they are in control of things. They like the little world they live in. Just keep him in a safe place.

Mincemeat is spot on. There's really not anything you can do to make your dad comprehend his disability. My dad is 85 with increasing dementia and we are entering this same strange landscape. I'm quite sure when I have to get the car keys it will become physical, and the trip to the memory care facility will be an epic battle. I will feel horrible and guilty, just like you, and my mother will be devastated. But it's what has to be done for the sake of everyone. Few people escape this process in dealing with eldercare. The guilt will subside, lives will end and others will continue.

When I told my father that he could not go back home he totally flipped out and has not looked at me or spoke to me since. Be prepared for the worst if you feel the need to tell him. If you can placate him by "kicking the can down the road", then do so, just to keep the peace.

This is probably the hardest dilemma you will ever face. Just to be open about the situation, it is probably not fair to the ALF staff to pin "not going home" on them! By this stage of the game, all logic and reasoning is over. IMHO, you just need to tell them what you need to tell them to keep them calm. (And keep telling yourself that you did the right thing: he is safe, fed, cleaned, medicated and looked after!)