Children don't have to be happy about discipline. IMO, that's part of the point - misbehave and there are going to be unpleasant consequences.
Granted, there are more effective ways than shouting to teach a child this lesson. But DD and SIL are going to have to figure this out themselves. Anything you say, Lindey, would, unfortunately, be seen as "interfering," no doubt. I think you're very wise to bring your concerns here instead of to DD or SIL.
"My son in law seems to think my grandson should understand that no means no and should take a telling, but I feel he is expecting too much from such a young child who is just learning right from wrong."
I think you're both right. GS is "just learning right from wrong," but IMO, part of that is learning to obey parents and that "no means no." True, I feel it would be better to distract him from things he's not supposed to do/touch/etc. while still saying "No." But SIL sees it differently and he's the parent (as is DD), not you or me.
As long as he's a good, loving dad, overall, and it's a happy household, I think your GC will be ok. I get how you feel though, and hope that as GS gets older and there are more privileges SIL can take away instead (electronics come to mind), there will be less yelling.
Another week, another Tory MP sex scandal!