You are correct that the sentence is uing ये, मेरे, and हैं to show respect. However I'm not understand what you mean by your other two questions.
Yes. You can refer to a third person as plural to denote respect/be formal. For instance "बेन जी बहुत अच्छे इंसान हैं ।" Is "Mr. Ben is a very good person".
I don't know if I have understood your other question but if you are saying that the sentence is not referring to two grandfather's, then you are right. The plural is to give respect to the single (paternal) grandfather not because there are multiple grandfathers. The maternal grandfather would be called नाना not दादा.