Princess,
I enjoyed your post and hope that I have not gained too much consolation at the expense of you and your other family members. Yes, I have an Aunt that makes Tony Spranos' mother look like Mother Teresa. And yes, my mother's family are all Sicilian.... the whole nine yards.
The key point is that you did two very healty things. You made your Grandma responsible for her power of attorney decision and you set boundaries betwen yourself and her. Now, that kind of lucidness in families is rare, especially since you seem to really care about her in spite of her neurotic-ness.
If she would have been dealt with such functionality by all family members in the past, she would have never been enabled to carry on the manipulation you allude to. Perhaps she would have been more able to live with current family as opposed to assisted living.
The reality is that family members have a responsibility to themselves every bit as much to her. Every situation is different.
It is nice though to see people standing for principle and responsibility in the face of dysfunction.