My friend's son at that age talked about nothing -- nothing -- but cars for a long time. Crazy about his toy cars, knew all types of car makes and models, etc. Everything was car-centric. Another friend's son at five talked and thought about nothing but Star Wars and played nothing but light saber battles with imaginary opponents. For months, not weeks. I could list other examples but it seems very, very common that between about three and five or so, kids will fixate on one thing for a time and their whole being is absorbed in it. This is normal. All the kids I know who've done this are perfectly fine. This may be a case of kids finding something that's "theirs" and that for the time being engages them. They almost always move on to something else they like so much that it then becomes the new Thing for a time.
I think you're overthinking the green piggies. The grandparents have handled it their way, and though you don't agree, let this go. Don't bring them up to your son, or encourage him that "It's OK to talk about green piggies to mommy" -- just don't say anything. It will pass.
Depending on how they handled it (if they yelled or criticized, that's not right), I frankly think it was OK for the grandparents to tell him no piggy talk at their house. You seem worried that it's stifling his imagination to tell him that, but adults do have a right to tell a child of nearly five things along the lines of "We've heard enough about the piggies today and they need to go to bed/go outside/whatever at our house."
As long as he isn't punished for mentioning them, but just reminded immediately, "No piggies here at grandma's house" it's OK -- and grandma should instantly distract him with something else to do or see as soon as he brings up piggies. He needs redirection and reminding but not punishment. But that won't stop him from imagining; it just teaches him that there is a time and place for things, and that grandma's house is not a place for piggies to come out to play.
The cutting remark is troubling; however, if he has not and does not repeat it, I would just listen carefully to him and not dwell on it too hard. Did he actually attempt to cut you or wave around something as if he were acting it out?
If he does begin to tell you that characters - the pigs or any others - tell him to do things, or if he misbehaves and then says "But so and so told me to do it," that is a real issue. But he isn't doing that now. Just know that it's very common for kids to fixate on a character or show or book or whatever for what seems like a long time and it's pretty normal. If he starts to blame his own actions on them that's different.
Oh, yes. And you need to dump the Angry Birds game, period (I assume you already have?!) and I'd just not do any other computer games. They're animated and the kids feel a lot of power in making characters move and do things, and maybe that's not for him at this young an age. Push books instead, and if he can't read much yet, read to him tons and there are "read-along" devices that "read" the book with the child when he turns the page, etc. for when you can't read with him. Encourage a lot of imaginative play, keep a costume box, etc. and have plenty of play dates - you mention preschool but not whether he has play dates with other kids one on one often. And it's fine that he is good with adults and prefers their company -- that is also pretty normal for bright kids.