First question, are the photos REALLY pornographic or are they just cute pictures of his grandbaby running around naked and this is a case of overzealous prosecution? It is not unheard of for the child protective services to overreact and screw up someone's life.
Second question, if the grandfather lived in NH and the child in FL, why did CPS take the child out of the home? That isn't right or called for in this case.
Third, IF this is really child porn, I would bet that this is FAR from the first time. I'll bet his daughters (if he had any) and their friends were molested, too.
To answer your first question...the man left the first store when he realized that the pictures were going to print behind the counter. He wouldn't have done that if he believed that the pictures were innocent.
He also admitted to taking sexually-explicit pictures of his granddaughter. No one would admit to that if it wasn't true.
Regarding your second question...I agree with you. I don't see any reason for CPS to remove the child from her parents' care when the grandfather doesn't live there. The little girl is being further traumatized by not being with the people that love her the most.
Third, you're probably right. He probably has a history of this. I find it difficult to believe that a 63 year old man suddenly becomes a child molester.