Margaret, you might have a look at Friar's Lodge in Kinsale. It's a four star property and right in town, so easy walking location. I'm sure it would make a nice impression for your grand daughter's first visit to Kinsale!
For restaurant suggestions, I recall some good meals at Gina's Cafe, the Blue Haven Hotel/Restaurant and The Little Skillet. Not sure what age your Grand daughter is, but The Tap Pub has lots of history and character (they serve Guinness, Murphy's & Beamish, and I had to try all three!).
Finally, you might enjoy the Ghost Tours (which begin a The Tap Pub). The two individuals that provide the tour are quite entertaining.
Happy travels!