I remember the OPs original post about this a few months ago. Have you not seen your grandchildren since then, or just not had them to stay over? I know times have been difficult with recent restrictions, so you may not have seen much of them, and the grandchildren may naturally feel a little apprehensive about staying over anyway. If you have seen them, how has your DH been with them, and how has your little GS been around him?
I think perhaps that your DH was probably a little bit embarrassed, and felt guilty that he'd upset your GS, and he didn't really know how to respond. If your GS hasn't seen him for a while, he may feel a little apprehensive because of what happened, especially as you say he's a sensitive soul. He just needs a bit of reassurance that grandad meant no harm.
When they come to stay, could you organise a nice little outing with your grandchildren, and your DH, so that your GS can see that his grandad isn't really an old meany, and he can have fun with him? Maybe a trip to the park, a farm, a picnic, etc.?
I personally wouldn't make too big a deal about it. Once your GS realises that his grandad can be fun, and it was just a one off, hopefully he'll be fine. Your DH probably feels really bad about the whole thing, and he'll only feel worse and awkward around the children if you continue to speak about it. Of course, if it was something that happened more than once, then that's a different matter.