OP has already said experience type gifts aren't an option right now (a few posts back). I realize you say you want to give something they can use now - Unfortunately just about ANYTHING can and probably will be co-opted, unless it is either specifically too small for older child to wear now. With that in mind I wonder if you could just visit a thrift shop near you and check to see if they have anything in the size the younger child is wearing now. That way you wouldn't be spending a lot on something that she might only wear for a few months, especially if it is cold weather gear; also, as a thrift item, you wouldn't be as concerned if they were stained/ripped in play and such. Heck, most of my gifts to my nephews at that age (up to about age 6) were thrift store finds for those reasons. Either that, or something that is extremely specific, something you know Younger likes but Older does not. Even things like toys or art supplies would be shared too, as they often are at that age, especially if the parents don't enforce a division of possessions. Perhaps books might be an option - even if older likes them, they could still be enjoyed by the younger if they are in the household and not stashed under older's bed or something. In my experience books don't tend to be an item that is kept away from one another.
Even embroidering a name on something might not work to save an item from older's greed. At that age, kids don't know that taking is bad unless their parent tells them... and the grandparents in this case haven't told her this. She will likely learn this anyway in school, so the GPs aren't doing EITHER of them any favors.