I would tread very carefully here. Just because the Grandmother wears pants or does not cover her hair does not make her irreligious. Some people do not observe all the mitzvos in exactly the same way as their children. And many kids coming back from a year or so of learning in E”Y come back following a differnet shittah from their own (religious) parents. The ikker is to teach respect for ALL people involved, while explaining that we are always trying to bring ourselves closer to HaShem, and the derech we follow teaches us to do those things that some family members do not do. But we still love and respect them, and so too Hashem loves them.
The issue of grandpa and Totty in shul is a more difficult one. When my father-in-law O”H, who was not frum, came to visit us frequently, he ALWAYS wore a kippah and he always went to Shul with us, even though he could only daven in English. My kids knew he was not religious, but they adored him, and he adored them, and every word of Torah out of their mouths was gold to him. If the kids are taught Derech Eretz from Day One, they will not be likely to ask those questions in a derogatory manner, either.