I believe this is nothing more than creative geneology on the part of Arafat.
I believe that this is the truth. I don't remember the source where I first saw it, but Arafag has something like 8 names, among which is "al-Husseini." He initially hid his association with the Grand Mufti, from what I read. Can anyone confirm this.
Regardless of his genetic bloodlines, Arafag's ideological bloodlines are clear and despicable. He may as well be the nephew of that Nazi-loving pig, as his actions would do such an uncle proud.
I look forward to the time when Arafag joins the Grand Mufti.
While I can't comment on the specifics of this case, I do know that the al-Husseinis are a very large Middle Eastern clan, that have hundreds, if not thousands of members. Oddly enough, neither the late King Hussein (a Hashemite) nor Saddam Hussein (a peasant) are Husseinis. So its quite possible that Arafat has some ancestral ties to the Grand Mufti's family, but it seems unlikely that the two are closely related.
The only time I have read that he is related to the Grand Mufti is when he is speaking of himself or PLO/PA propaganda.
But no matter... we may never know.
You have accurately stated the greater connection between the Mufti and Arafat when you said that his ideological bloodlines are clear and despicable. His actions would do his "uncle" proud.