An option is to go for a semi scientific and natural process. The body is made up of water and minerals and other things. When the soul passes out of a body (you can insert your concepts of Heaven if you believe them or whatnot), you can say that what is left is a shell, like you see on a beach. There used to be a little creature living there, but it has moved on.
When bodies are left behind and people move on, some people like to return back to where it came from, part of the same water, earth and air that it is made out of. In granny's case, she would like to return to the earth with her husband. So their ashes are united and dispersed and become part of this earth. What cremation does is help people get back to a nice form for the earth to take it in - it's faster. It's um... a little like baking cookies, heh.
I guess the actual dynamics of the cremation is harder to explain. I think I was explained about it when I was a child (it's part of most Hindu funeral services) and it was always explained to me that it was a cleaner, more hygenic process. There were no boxes and digging, and decomposition, or nasty things. Just pure, clean silt. When I was little, the whole concept of being buried was kind of funny, gross and scary - nobody wanted worms up their noses
So cremation is the way to go! I think little boys would probably be more susceptible and appreciative of the gross factor, but I can see how a little girl wouldn't want to even think of that. You never know though. I think I was eight and somebody we knew died, and they told me about cremation, that it was like a flash process turns your body (that nobody will use anymore) into a compact, neat form.
Hopefully I didn't make it worse...
I think it's a beautiful gesture the granny made - I think your child will be okay with it.
FYI - Paul had a cremation and wanted one from the get go.
The only issue I have was with the lack of a funeral process. If the granny doesn't want any kind of viewing, a celebration of life party, like a wake, can easily be done, and I think that helps a lot of people remember great times and enjoy the life of the deceased. It helps with closure too. Paul wanted a grand ole party when he died, and that's what he got. That's the only part I had a hand in, the other stuff his family made plans and I didn't have any choice in the matter of his viewing.