It really varies here. I rarely see candy come home from school since it has a no candy policy. I was actually surprised to see some valentines come w/ the kids that had candy but each of the boys only got one or two pieces so I was fine with that. We don't do much candy either, especially since my oldest son has to be on a low-glycemic diet. It would be too much of a temptation if it's here.
At Halloween, the night of, we let them eat as much as they want. Any that's left over gets set out in their bags on the porch for The Great Pumpkin. He takes the candy away (it goes w/ hubby to the office) and a small toy or book is left in return. My kids love this. I have heard of other families who can't eat candy due to dietary reasons put all of it in a big jar and when it's full (not sure what they do with it) but the kid turns it in for a toy or book or something.
We don't do candy for Valentines or Easter (unless we happen to make homemade chocolates together as a family which is rare). For Christmas they only get a small bag of chocolate coins & a candy cane along with their nuts, an apple and an orange. We also don't do candy for their birthdays unless we happen to find something that goes w/ their theme (rare) but even then it's not eaten at the party. It's sent home for the parents discretion. But I also serve a small lunch at my parties so the kids don't go home hyped up on sugar.
Every once in a while I don't mind if the kids have a piece of candy but like you we could never eat much at a time. Once it's been there for a month, I just quietly throw it away. It wouldn't taste good anymore anyway. Although, it is a good idea to stash it for gingerbread houses. Those are so much fun to make and any candy goes. Or other projects. I can't with my kids though. My daughter K did a project like that in preK and I couldn't get her to understand that it wasn't ok to pull the glued m&m's off of her paper & eat them. Yuck.
What candy does come in our house is made as much as possible from natural ingredients without any extra fillers, dyes, preservatives, etc. and since those candies are more expensive, naturally we eat much less of it. I also enjoy making them at home but our candy isn't generally considered "candy"; it still satisfies a sweet tooth. :)
I would tell grandma she can't give the kids more than one piece of candy (or one box) and that it has to be from a list you approve. Or ask her to spend the money on a book for your daughter instead, or even a stuffy or something that she collects. That way she'd still feel her gift is being appreciated and you don't feel like you're being inundated with candy.