Hi, M. --
I am a gift-giver. I really enjoy it, and I must admit, I'm pretty stinkin' good at it, if I do say so. Sometimes, I'm so good at it, I think it even aggravates people whose gifts get shunned because mine are better-received. It's not that I buy expensive stuff -- in fact, I'm pretty "frugal," but the secret to my magic is that I can generally size people up and see something that I know they will enjoy.
So, it seems that with your kids' grandparents, they probably don't know your kids well enough to understand them and what they'd enjoy, even when described.
Also, bear in mind, giving is a joy in itself, and if you feel that the grandparents honestly love the kids and are giving generously from their hearts, the best they can, then I would take a different tact than the one you probably want to take...
My husband and I were once actually asked to stop giving gifts to one of my friends because his wife felt "outdone" by us... Believe me, we werent' doing anything excessive... unless you call getting him his favorite kind of breath mints and gum excessive... but, whatever... he liked those things, and she felt he wasn't as stoked about what she was giving him. Anyway, that's an old issue, but the result was that it made me feel really unhappy to not be able to get the things for him I knew he'd like. We did scale it back to the minimum to resolve the issue, but it was a disappointing solution, we felt.
Anyway, that feeling of disappointment is what causes me to suggest that, rather than telling the grandparents that their gifts are not useful or that you've got enough of X, Y, or Z, why not just accept that this is the way they feel they are doing their best for your kids, and they are sending these things with love and affection, however misguided and not applicable to the kids' ages and stages.
Then, you can turn around and enable your kids to re-gift these gifts to kids who DO need them... there are SO many wonderful charity organizations you can contact via church, community, or school groups. You can save the things for wintertime Christmas donation drives, etc. The items could bring a considerable amount of joy to other children, and I will bet you your kids will feel wonderful about being the facilitators of that kind of joy. Let's face it - we all have TOO MUCH STUFF. I love my stuff, but I know how ridiculously much of it I have relative to people in most of the world. So, if someone gives you an opportunity to channel it and give it, then the love they put into it can be passed along to someone who's low on love.
You can let your kids know that, despite the fact that their grandparents are out-of-touch with their level of maturity, they are still sending their LOVE, which is the real point of gift-giving anyway.
Another thing we sometimes do is donate our items to the animal shelter where we volunteer. They have a quarterly open house where they sell stuff to raise money. It always feels good to know that we're able to help out by doing something so easy as giving something away that they can use as a fundraiser.
I hope this gives you some ideas.
Take care - I think this is a wonderful lesson for your kids.
H.