Little kids are far more perceptive then most people give them credit for. Like I said if the kid and grand kids are in a close proximity to each other on a regular basis. Chances are the grand kids already know that the aunt or uncle is not quite right whether they know how to express it or not.
Of course if it's you kid you can proceed the way you see fit. I said how I would most likely handle it. I don't like to make something more of a "thing" then is necessary. Some people build up in their mind what another reaction is going to be. When that expectation is not realized, things become different.
The grandkids may also know their other uncle is cheating on their aunt. Would you then have the uncle and his mistress for Christmas dinner? That would send the wrong message to all parties. Why are people so willing to make children and grandchildren uncomfortable to satisfy the emotional needs of the gay child who has chosen to rebel against God, society, and family. All the while, the gay child expects all participants to violate their conscience and remain silent in the face of willful and unrepentant sin. Spare the rod, spoil the child.