How do I handle this?

My reaction is: What not to like?

Despite the break up and remarriage the parents are doing everything to help their children, the step father is loved and they feel free to have silly competitions like this in their grandmother's presence.

Dip into some of the many threads under 'Grandparents' and 'Relationships' and see just how difficult, and sometimes vile and poisonous, relationships following family breakdown can be.

Then rejoice that your family has been spared so much acrimony and the children can argue without fear who is best, DF or DSF.

They are playing out their confused feelings with you and with each other. Shows they have healthy relationships, and must feel very secure with you.
I think you did absolutely the right thing, and I wouldn't dwell on what was said, your GS is trying to express quite complicated feelings. You have left it do that they can continue to talk to you and that is a great help for the whole family.

Children's affection can be very fickle and I don't think they really understand the concept of 'loving someone more'. It's very likely that his step-dad did something fun with him this week which means hes the 'favourite' for now. It'll change all the time.

Also, his step-dad probably isn't as involved in discipline as his mom is there to do that. So the step-parent is sometimes the fun one who doesn't have to deal with telling them off. As they grow up they understand this. I agree with a pp, it's great that there are so many people that love them.

I would tell them they are both allowed to love different people different amounts as well. They don't have to love the same person the most, to try to stop your GD telling him who to love more, which might then avoid the arguement.

I understand how you feel ruthiek but those feelings are best kept to yourself.
I agree with Grannygravy.

I would take comfort from the fact that your grandchildren have two "fathers" who love them very much and whom they love back. Along with the fact they have two positive male role models in their lives.