I had a cousin of mine die quite recently and took my 3 yo son to the funeral. We sat right up the back and actually spent more time outside than in the church. Why did I take him? Well, my parents were quite close to this cousin and his family (though I hardly knew him), and I knew my parents would be comforted by having my son there. He really wasn't too aware of what was going on and was happy to spend a day with me and his grandparents. I think your situation is fairly difficult as your grandson was obviously quite close to the deceased.
Funeral directors - yep they can be quite predatory, but you have to remember that it is a business for them and their biggest margin items are coffins and what-not. My wife used to work for one so I've seen it from the inside.
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