This page's dialogue is mostly from Harry Potter and the Sorcerer's Stone, pages 13-14.
It's possible, at this point in history, that Dumbledore and McGonagall don't know the Dursleys' attitude towards magic. If they did, it's possible that they could rationalize it away by saying that the Dursleys will still treat Harry well because Harry is family to them. (Dumbledore would say “still love Harry” instead of “still treat Harry well”, but there are plenty of people who love their children and still behave abusively towards them. Dumbledore thinks love is sufficient, but it isn't.)
Parents who send their teenage children to WWASP schools (TRIGGER WARNING for child abuse if you even do a web search for “WWASP”) sometimes don't know about the abuses there, either. Does this mean Dumbledore is like those parents? (In short, WWASP is an organization that runs schools that keep teens in isolation and use extremely abusive “behavior modification” tactics, while denying everything and presenting a clean face as a program for “troubled teens”. Tranquility Bay was a well-known one that got shut down, but there are many others, such as Cross Creek Programs and Horizon Academy.)
What about McGonagall, though? Ze resists the idea of placing Harry here for a moment. I could imagine zem as a person who's aware of the issue, but gives in because ze knows ze won't be able to argue Dumbledore out of it... But is it true?
In the movie, McGonagall describes the Dursleys as “the worst kind of Muggles”. In the book, ze doesn't say that outright, but says “You couldn't find two people who are less like us” – and I infer that “us” means “wizards”. Ze goes on, “These people will never understand him! He'll be famous!”... So it seems like zir objection is to a person of high status (a wizard, a child of a prestigious family, a legend) being placed with a family of low status (muggles, people with distasteful behavior by wizarding standards). McGonagall isn't thinking about child abuse here – ze opposes the placement because ze's racist.