Cathy - Your story reminds me of ours. After well over a decade of marriage, our son divorced our DIL (actually she left him and abandoned her two children) and it is getting much better. I really believe that some are not capable of being a nurturer to either a child or even a spouse; and I believe that our DIL fits into this category. Oh, she tried - but the rages, fights, lack of empathy, extreme self-centeredness, and plain "no mothering" overshadowed any efforts on her part. She could not get past the "what about me" phase.
I believe that our DIL suffers from a personality disorder and that she never, ever should have tried to be a "mother". I'm wondering if your DIL also suffers from a mental health issue. Whatever - it will be up to your son to take care of your grandchild. In our case, we had to back off - way off, and let our son deal with the "family". You did not cause this; you can not control this; you can not cure this - I used to say this mantra over and over, again and again. It's not fair but it is what it is.
Surprisingly, we are close to one of our grandchildren but not the other. It seems the elder child is of the same genetic make-up as the mother - yes, it hurts (a lot), but there is nothing I can do. Maybe when she gets older .... Boy - this is not what I thought having grandchildren would be like - you know, the happy Christmases, loving Mother's Days, barbeques for Father's Day - but, we're coping. One thing that I might add is to be careful not to sever the ties with your son because if he has to choose between his parents and his wife, he will choose his wife. Be really careful what you say and do in this regard. I feel this is the relationship you will need to fight for - by the way, the last three years of our son's marriage our DIL did not speak to us, even once, let alone attend any events. I've been there - a situation I would never would have believed on their wedding day. We are still fighting for a "normal" relationship with our son.
You will find that many other women, wise women, on this site have also been held "hostage" by their DIL's. Not fair - but we cope and we learn and we survive ....