Christmas has always been a "let's give the kids lots of stuff" to my parents and maternal grandparents. My paternal grandmother gave far fewer gifts that had less expense, but they were as well - chosen and thoughtful as the gifts Mom, Dad, and the maternal grandparents gave. I cherish every gift I was given, and I never saw one level of gift - giving as "bad" and the other as "good." It was what each could afford, and the thought was what mattered.
However, it seems like MommyPenguin's kids are...not necessarily greedy, but unthinking about their responses to the gifts they're given, which is a bit normal for younger kids - they don't really have a brain to mouth filter as older kids do. Also, I think 16 presents per child, unless they're mostly little things like drawing pads, pencil sets, etc. is a bit much. I think I got 16 presents one year...from my parents, both sets of grandparents, and two of my mom's brothers combined.
I think MommyPenguin and her DH need to work this situation on both fronts. They need to speak with MommyPenguin's parents about the amount of gifts, because, while it certainly is generous and nice, it's not really good in the long term. Then, they need to speak with their kids and tell them that it's not nice to value Grammy and Grandpap's gifts over everyone else's - all gifts were given with love, and should be treated equally.