Both थीं and थी make for a valid translation. The plural verb "गाती थीं" used with the singular noun phrase "उसकी नानी" acts as an honorific plural and is only mandatory when the speaker doesn't want to come off as disrespectful towards the person being referred to.
Why is उसकी दादी गाती थीं "wrong"??? From the English sentence it is impossible to tell if it´s the paternal or the maternal grandmother, so both दादी and नानी must be accepted, or am I completely wrong?
On Windows, you just have to add the language in Settings -> Time & Language -> Language. You can then switch your language by pressing Win key+Space. (It takes a while to learn which key gives which letter though.)