Taken on its own, in a strict sense, morally it's fine. The trouble comes because the kid will be bullied like you wouldn't believe because people are like that, his/her life would be a nightmare.
I am actually intrigued by what is making me feel the "ewwwwwwwww". The incestuous part obviously, but the fact that she's really old too. Is them being grandson/grandmother better than brother/sister? Or worse? What would make me more uncomfortable? I don't have a sister so I can't compare, the closest would be my brother but that's same sex and already a line crosser for me. (I'm not saying homosexuality is comparable to incest at all, before some angry man has a go at me, I'm saying it's an extra contributing factor to me trying to understand my brain!) I am guessing though, that brother/sister would be seen, by most, as weirder than grandson/grandmother. I see it as weirder anyway.
PS. From what I read here the child would only be related to the guy, the grandma wouldn't be related at all. The egg is from a donor and the baby would be carried by a surrogate, so no familial gene sharing.