Don't feel bad, grandma. I just went through the same thing with some of extended family this Easter. The little one (about 6) was playing Driv3r. Same theme, kill people, kill cops, run people down, take their cars, do it again. The problem was he was so into it! Don't know why parents don't pay attention to these things.
It's quite inappropriate for all of them, especially the 7 and 9 year olds. The GTA suite was designed for adults. Alot of people can't grasp that, but the average age for owners of Xbox's and PS2's are 26 and 28. Kids tend to migrate to the Nintendo, and a qucik browse through the game section will prove that fact. Nintendo's have a few adult titles, but historically are overwhelmingly dominated by kid titles. Xbox and PS2 on the other hand are dominated by adult titles. Your daughter (in-law?) needs a serious reality check.