Hi Sausagegirl, I suffer from severe osteoarthritis myself. You might want to look into getting him a TENS machine (around �35.00), or a pain pen. These are quite effective and if he gets used to using the TENS machine before the grandchildren come, he will find it much easier to cuddle them.
Try some of these sites for other aids and therapeutic items that will ease his pain:
http://seniorshops.com/arthritis
http://www.aidsforarthritis.com/.html
There are numerous sites but you can also contact your local Social Services, who will be able to suggest items to help him, such as grabbers etc.
I know how hard it is when you want to play with your grandchildren and just can't. But there are ways in which he can improve things so he will be able to play with them again. Best wishes.