All those things mentioned, while important and valid, are all worldy matters. I’m happy for this child’s soul and the graces received through this sacrament…I’m happy about the bigger picture : )
No, please, do not look at it that way. The Church has a reason for her laws, and there is a reason that this was an illicit and disrespectful act that would not have happened if the grandparents were both well-informed and obedient Catholics. Would you be happy if your baptism had been an illicit and disrespectful act that was not backed up by the capacity to provide for the formation that your baptism ought to have guaranteed you? I don’t think so. It is a sad situation, yes, but their disobedience made it worse.
The OP has come to the charitable conclusion that his in-laws did what they did out of a well-meaning but mis-formed conscience. You, however, know better, having read this thread. Re-form your conscience, then, and conform yourself to what the Church tells you:
What they did was wrong. It was an offense against the laws of the Church and against the trust of their children, which the justice in the Church’s laws aims to protect. The end, though, valid, was poisoned by the means. It is very possible that these grandparents will not have the opportunity to form these children in the faith, but even if the parents had a total change of heart on account of what the grandparents did, what they did would still be an offense. That is the bigger picture. The birth of Solomon did not make what David did to Uriah the Hittite OK!
The OP and his wife are being very forgiving about this whole thing, which was not only an illicit act against them in the legal sense but a deception perpetrated against them in the interpersonal sense, and by those they should have been able to trust beyond question. It is unfortunate, too, that the grandparents will put their pastor on the spot to record an event when he knows the parents of the children would rather he could pretend it never happened. He has a duty to keep a truthful record of what sacraments were performed in his parish, rightly or wrongly, as long as they were valid. He has the sad knowledge that there were children baptized in his parish whose pastoral care he will be impotent to provide, because unlike his parishioners, he is obedient to the law and respectful of the children’s parents. *That *is the big picture, and it is not a happy one.