It is hard enough to take criticism about our children. I know it must be harder when it comes in a slanderous way--and worse, from a grandma.
I do not know how bad this woman is because I am not counseling her. When I counsel people who are having difficulties with others, I try to help them be godly first rather than teach them ways to get the other person to be godly. This is what Paul taught the Corinthians and what Jesus taught about specks and planks.
The venue makes a difference, too. If you are at her house you are guests, but are still the parents. If she is at your house she is in your domain. Give a little, but know your limits of tolerance and develop a Spirit-controlled contingency plan should things get out of hand.
While I do think our elders and parents deserve a different kind of treatment when they sin, I also think this falls under Paul's counsel to Timothy about how to treat older men and women (1 Timothy 5:1). Even being in authority does not exempt you from loving rebukes—even from your wife and children. My wife and children have—without disrespecting my authority—honored me many times by pointing out flaws in my thinking or behavior. We have considered it the humble thing to do to give our children the right to respectfully disagree as long as obedience was priority one.
In this case, the mother is no longer in authority but is still to be honored. I believe the first step of church discipline happens the most in homes and we never hear any more about it. When someone is not in your church or area, appeals to their local church authority may be fruitless. Sometimes it is best to do your honoring from a distance and follow Paul’s “God has called us to peace” at family gatherings. Might we also consider the principles of a believing wife staying with an unbelieving husband if he wants the relationship to continue?
I would counsel the daughter in this case, as the offended party, to ask her husband to protect her children from harm, but to let herself be defrauded (1 Corinthians 6) for the sake of the relationship. We look like our Savior when we endure unjust suffering. Even children can learn that we should respect and love grandparents even if they do things that do not please God and that we can love grouches, satisfied that what is most important is what God thinks of us.