Unfortunately, The Truly Terribly Horrible Sweater ... That Grandma Knit, by Debbie Macomber and published by Katherine Tegen books, won't be out until October 1, 2009. I haven't seen it, but when it's Debbie Macomber, how can you go wrong? The minute I lay my hands on it, I will report back.
I have read the following books many times to children in my storytimes. All are wonderful, with grandparents as characters.
*What Grandmas Do Best; What Grandpas Do Best--both by Laura Numeroff
*Yoko's Paper Cranes by Rosemary Wells
*Grandfather's Journey by Allen Say
*In the Rain with Baby Duck by Amy Hest
*Mailing May by Michael Tunnell
*My Hippie Grandmother by Reeve Lindbergh
*Abuela by Arthur Dorros
*Bunny Cakes by Rosemary Wells
*The Napping House by Don and Audrey Wood
*Thunder Cake by Patricia Polacco