How is it genetic inbreeding? The old man is donating to his dauther-in-law. It is no more genetic inbreeding than if the husband was the sperm donor.
As far as the weirdness factor goes, I think it would be very weird just to know that you had been concieved by this process, and I don't think that knowing that the donor was some stranger would make it much less weird than knowing that the donor was grandpa.
Still, I agree that the couple should adopt instead, there are so many children out there needing adoption, why push the limits. But its their choice not mine.
Actually, I don't think the child should know at all in either circumstance.
However, I would have to disagree with you. As for the child, you don't think it would be more strange to find out your dad is really your brother? As for the mother, you don't think it would be more strange to give birth to your husband's own brother or sister? As the father, you don't think it would be more strange to have your own wife give birth to your own brother or sister?
“I think it would be very weird just to know that you had been concieved by this process”
There is no comfortable way for thinking about how you were conceived.
It isn’t inherently bad for the child, psychologically or otherwise. The only bad is from people (including other children) around the child whose irrational cultural bias prejudices them against it.
Many people want to have babies, if possible, to control the prenatal and post-natal and early infancy environments. There is nothing wrong with donation of gametes. It should be no different to donation of other organs. Parenting is a verb, and those who do it well are parents. Period.
Actually, I think it is a good thing. I would argue that if anyone should be a sperm donor, it should be the closest living relative of the man that intends to be the father of the child resulting from the sperm donation. Likewise, if some woman is to donate an egg.