Honestly, I'd use the word liar. In front of Grandpa. I think that would get him to understand that when he's saying things like that, he's lying, and to a child. If he tried to protest, I'd say, "Oh, so you *were* going to take her to Very Special Place?" When he says no, he was just joking, then, "Do you see anybody laughing? Does Taylor seem to think you're funny? Jokes should make people laugh, not cry. When your "jokes" make people cry, then it's just bullying, and it's plain mean." I think he needs a harsh wakeup call, because it's obvious that this has been addressed over and over without him making any change. And Taylor needs to hear that he's a liar. She needs to be prepped ahead of time, and reminded as he's saying it as well.
My father liked to sometimes joke, when leaving from a visit, about hiding the kids in his suitcase or car to take them home. He'd joke like that to me when the kids were babies. But when they got bigger, they thought he was serious and they'd run to get their stuff. When he realized that they didn't understand that he was joking and that he couldn't really do it, he apologized profusely, both to them and me, told them that he'd *love* to take them home but that they had important stuff to do with Mommy and he had things to do that he couldn't take kids to, but that he loved them and couldn't wait to see them again. *That's* how an adult who accidentally makes such a joke handles it. This FIL is way out of line.