To simcha613:
Your questions are very important. I suggest that you speak to people who have similar experiences as well as people involved in kiruv. You may get some good answers in this forum, but on the other hand they might not be appropriate for your particular circumstances.
1) Some families have been able to explain to the grandparent generation how much better it would be for the relationship with the grandchildren if they would demonstrate respect for halocha in their presense. 2) If you perform mitzvos with joy it will make it easier for your children to deal with the challenge.