HI L.,
I thought of a few ideas.....
1. Hallmark has a recordable book called I Love You Grandma that your son can read and the story gets recorded. She could display this book proudly in her house. I've seen this book in Hallmark. I copied and pasted the link if you want to take a look.
http://www.hallmark.com/webapp/wcs/stores/servlet/article...
2. Check out photo stores such as snapfish.com for gift ideas. (I am on their email list and I've received sale codes lately for products that can be used as gifts.
3. Someone already mentioned it... so I second the idea of a stepping stone for her yard. JoAnne's and Michael's craft stores always have 40% coupons so you can get a $20 one for only $12! It's fun to make these and grandma's love this kind of stuff.
4. Magnets for the refrigerator that say.... I love you, Grandma and tie it in with a photo of your son or his artwork.
5. A hand painted clay pot made by your son. You could help him make thumb prints all around it and turn the thumbprints into bugs or other creatures or simply smiley faces. Then have your son help you pick out some plants from the store to plant in the clay pot. (You can buy a clay pot at hardware stores and maybe even craft stores and they come in a lot of sizes. (Buy the clay tray that goes under it to catch the water.) These pots are inexpensive.
6. Print out a poem about grandmas or have your son copy one and put the author's name below for credit purposes. Then have your son decorate around it and frame it. (There are grandma poems on line if you simply type the words for a search.)
7. Shaper's Image has a photo book where you insert a photo and then you have a few seconds to record a message about each photo. We gave this to my MIL a few yrs. ago and she loved it. It's so cute to have as a keepsake with their "baby voices" when my twins were around 3.
8. You mentioned you have bracelets but do you have one where you can include photos. I have one and it's so cute. I got it when my kids were babies and that was 8 yrs. ago and I can't remember where I bought it but it has beads and then a place for a photo and then a few more beads and another place for a photo....
Have fun with it!