D. - I'm sorry for your family's loss of Grandma. My dad died 2 years ago when my oldest (Kayla) was 3. Like your family's situation, (1) Kayla and my dad were very close, (2) I had several months to prepare her for his death, and (3) she visited him a lot in the hospital and dealt with that very well, even though he didn't look like himself and was hooked up to every form of life support imaginable. Kayla was a little scared at first of the way he looked in the hospital, but she quickly got over that and enjoyed visiting him.
When my dad died, I was torn about taking Kayla to the open-casket visitation and funeral, followed by the burial. I didn't want to frighten/traumatize her, but I also figured that since she had seen him at his worst in the hospital, surely seeing him lying peacefully in the casket as if he were sleeping couldn't be worse.
After talking with some other families about how their kids at this age handled seeing a loved one in an open casket, I ultimately decided that I would not have Kayla attend the burial, because that would be just too long of a day for her, but that I would give her the choice about attending any part of the visitation and/or funeral, including whether she would want to look at Grandpa in the casket and even touch him. Of course, I explained everything to her in advance about how it was only Grandpa's body, and that his soul had gone to heaven to be with Jesus.
Kayla very much wanted to go with me to the funeral home, so I brought books for her to keep her occupied and lined up someone to take her home if she was uncomfortable being there. At first, various family members watched her in a far corner of the room, away from the casket, while I was up by the casket. However, over the course of the first 15-20 minutes, she gradually made her way over to the casket, moving closer and closer each time while talking with whoever was watching her. The entire time, I noticed that she was eyeing the casket with great curiosity.
When she was very close, I joined her and asked her if she wanted to see Grandpa, which she did. After staring at him for a short while, kind of in a curious way, and seeing me and my brother touching him, she then asked if she could touch him too, which she did. After that, she talked to him a little while to tell him goodbye, and then, she basically lost interest and went back to her books and talking to others. In light of how well that went, I feel like I made the right choice of letting her decide whether or not to go with me that day, as well as leaving it up to whatever she decided to do about seeing or not seeing Grandpa in the casket once she was there.
Good luck to you as you decide what is best for your daughter.
L.