Everysong
Even if that is the case, and FIL has valid reasons for feeling aggrieved towards the OP, there really is no excuse for his behaviour IMHO- especially that in relation to his grandson. It's possible you are right in that there is more to the story and perhaps OP has said or done something to upset/anger her FIL. However, given his horrible behaviour towards his grandson, I'd say there is a distinct possibility he's just not that nice a person.
It's really not acceptable behaviour to be so rude to someone in their own home- you either stay out of their way entirely, or if this is not possible then you are at least polite (but distant) when you are in their presence. You don't have to pretend to like them, just be civil.
As for being actively unkind to your grandson because you dislike his mother/his mother has been rude/unkind or whatever- that's just ridiculous. As for calling your young GS names, that is an unkind and bullying way to act towards a young child. The fact he dislikes the child's mother is not relevant when it comes to behaviour towards his GS. And comments such as "my other grandchild was the only one who was a good idea" are pretty inexcusable really.
OP- as I said to Everysong, regardless of his feeling towards you (and the reasons or justification for them) when he is in your home he should at least be civil and if he can't do that then he should not visit. When you are visiting them, again manners dictate he is at least polite. At the moment, your FIL is behaving like a bad mannered, spoilt child.
More concerning, though, is his behaviour towards your DS- it is completely unacceptable and your DH needs to speak up for his son. You may be able to defend yourself if you need to, but he is too young to be able to. I think you are right not to allow DS to be unaccompanied whilst with your FIL- and I would be open with your PIL as to the reasons for this.
Have you challenged FIL when he calls your DS names? What do your DH and your MIL say/do when he calls your son names or tells you "the other grandchild was the only one who was a good idea'? If they have heard this and feel it is appropriate way to speak to or about a young child I think it probably tells you a lot about their family dynamic (e.g. perhaps FIL has always been a bit of a bully so they see this as normal behaviour?).
I think you also have a DH problem too, by the sounds of things though.
I think you need to be clear with your DH re your concerns as to FIL behaviour towards your DS and ask him to tackle his DF about it. If your DH won't speak to is DF, or your FIL will not change his behaviour, I would simply absent yourself and your DS from as many visits from PIL as possible and would allow supervised contact only. I'd also be wondering why my DH would allow his son to be treated so unkindly by his grandfather- not sure if I could tolerate that, or more precisely not sure I would want to be with a man who felt was happy for his child to be called names and for it be implied it would be better if his son had not been born.