I would put Grandma's behaviour up as a serious red flag.
It's possible that the *only* thing she's nuts about is the baptism issue and its coverup, and that other than that she will be an exemplary grandmother who follows the parents' lead in how she deals with the child, and is open and honest about her interactions with the child.
But I wouldn't hold my breath. She's demonstrated that she will follow her own ideas about child rearing, against the parents' wishes and behind their backs, and then demand that people keep her secret. And she'll do it based on her own crazy ideas - as others have said, even from a strict theological perspective, what she did was bizarre, and her own minister would likely tell her that the previous baptism was recognized by her church.
So in the parents' place, if I knew about this, I would be angry, and I would be very carefully watching Grandma to how it progresses, but I would know that she was not someone I could automatically trust to 1) follow my wishes 2) respect my beliefs or 3) tell me the truth.