C.H.
I'm very sorry for the challenges you and your family are facing.
I would encourage you to be honest but brief with your children. You will likely be surprised by how much it won't affect them right now. However, it may also surprise you how much they remember and how positive they can be down the road.
Try not to use the word "sick" without explaination, but be very specific about why grandpa is sick. Young children associate "sick" with everything from a cold to cancer and can not yet understand the difference. My concern would be that the next time you get a cold they might think you are going to die because you are "sick".
Don't be surprised or upset if it doesn't affect them much right now. You might get a response like, "OK, can I go play". It's not that they don't care or won't be sad, they just don't carry the same grief or guilt that we do as adults.
Our son passed away last January at 3 months old leaving behind four older siblings (ages 2, 3 1/2, 5 1/2 and 9). We limited their time at the visitation, giving them private time for questions and good-byes. We arranged a slumber party that night with a family friend, allowing them some fun and us the time we needed to receive guests and process our grief. At the funeral we involved them throughout the service and they presented gifts to keep him company on his new journey.
It's our parental instinct to want to shelter our children and protect them from any hurt or pain and try to preserve an innocense for as long as possible. They are more resillient than we think sometimes. In difficult times, the insight of a young child can be the relief that grieving adults need.
Our children talk about their little brother often and it is very positive. They speculate about their different ideas of heaven and they remind us that he is in our hearts. It's OK.
It is better to explain death in a positive way and teach your children that it is a natural process than let them wonder why they don't see grandpa anymore or be scared by the unknown.
As far as involvement in visitations or funeral services, it is up to you and your husband/partner. If you decide to have them participate, I would encourage you to have someone there to watch them as you will be preoccupied with family and your own time to grieve. Just as your children need time to understand, you will as well.
Positive thoughts to you and your family as you work to heal. All the best....