S.T.
Absolutely nothing wrong with your son wanting to re-up what with all the layoffs going on with major corporations (mine is in another one now - the 10th in several years that I've been there).
I'm pro-military and the benefits that you have when you're in. Also, you're under a contract so you basically have a set amount of years to actually HAVE a job. The spouse benefits are really good, too, as you can travel, experience life at it's best and keep making friends whereever you go. If you take the military with a GOOD attitude, then it will come back at you 10-fold. It did for me and mine and we've never, ever regretted our years with the Army, Air Force and Navy. My husband was in the AF and Army. I was in the Army and Navy.
I understand about wanting the grandchildren to be close but there's nothing wrong with traveling to where they are and experiencing some new places for yourself. My best friend is in her 30's and my godson is in England right now. She's travelled there many times to see the grandchildren and keeps in touch on myspace as well as videos and flickr and snapfish. You can definitely remain an active part in your grandchildren's lives with this day and age of the online post office :)
Your son sounds like he has a good head on his shoulders and is thinking about the benefits to his family if he re-ups. I can tell you are very proud of him and his life so far - let him continue to do what he feels is best for himself and his family. He'll have retirement pay to look forward to when he gets out and it will be a much better return than depending on social security to get him through the retirement years.