Fouls language from grandparents.......
The grandfather's behavior sounds highly disrespectful and toxic. If he can't keep his language PG with or without your request around a kid you are WELL within your right to keep him away or avoid him. No confrontation needed ... he's already been asked and it sounds like he didn't respect it. Spend your time with someone else ... familial ties be damned.
I'm keeping an eye on this thread for suggestions also... My DS's grandfather uses foul language all the time. Unfortunate thing is...we LIVE with him. So we hear it every single day. He knows it bothers me but still doesn't respect my request. So... I know what you are going through and am also at a loss at what to do.
My MIL also drops the f bomb every other word, I just decided it would be a good lesson for DD about how there are all kinds of people in the world! But if it bothers you enough that you asked your FIL to stop and he was so rude and disrespectful about it, that is a whole different can of worms! I would have your husband (it's his dad, so his job to do it) talk to his dad again, and if things don't get better limit contact for a while, either until your FIL gets over himself of your your son is old enough that he can understand better what is going on and not be as influenced by the swearing.
Cuss jar. Have one labeled and decorated in your house. When FIL or MIL comes over, tell them to fork over a nickel or quarter each time. When asked, say you all are saving up for (insert great place to take dc). Even if they don't actually put the coin in, it makes the point. Many people don't actually realize how bad it sounds or how often they do it and how often they do it around kids.