Isn't Judaism dependent on the mother's side anyway? It wouldn't matter what his father/grandfather was, but his mother/grandmother. I think I read that somewhere...
Yes, Judaism is through the mother, so if your father is Jewish and your mother isn't and you want to be Jewish, you have to convert.
Yes, you're right. Kerry's paternal grandmother and paternal grandfather apparently were born Jewish but converted to Catholicism in Bohemia before immigrating into the US in or before the 1920s.
Since his father (and not his mother) was their son, Orthodox Jews would not consider him Jewish even his father had been a practicing Jew until his dying day -- and even if Kerry himself claimed to be Jewish (unless he converted to Judaism).