Blimey, I have read this post very differently to most PP!
I'd also feel as if my DC was being rejected by their grandparents based on what you've said here. She doesn't seem to have made any effort at all to even ask about her grandchild, but wants to turn up in public to have all the attention on her as "nan".
I'm trying to be balanced so I guess my questions would be: what's her relationship like with the other grandchildren? How much interest does she pay to them? Does she also forget their birthdays? Was she interested and involved in them as babies? What's her relationship with your DH like - do they have regular contact without the baby?
If she's the same with everyone, you'll just have to accept that it's not personal and that she's just not a particularly interested grandparent. It's then up to you to decide what's a healthy level of interaction between you, your DC and her.
If she's only been like it with you and your DC, that's an entirely different matter and I'd be extremely cross.
FWIW, I may view this differently as we have issues with one set of grandparents. They are interested and involved with their other DGC but totally forget ours. We're still waiting for them to be bothered to transfer money for "Christmas" which they rang on New Year's Eve to say they'd do. They said they were busy getting ready for a holiday but magically still managed to have time to get gifts for the other DGC.....just not ours. And ours are younger. I am struggling not to contact them and tell them not to bother now so I understand why your instinct was to return the money.
For me, it's the disparity and the lack of interest that's so hurtful. It's not about being over every week, or being in contact all the time but in your circumstances with a young baby and now a toddler, I'd expect a grandparent to be excited and want to build up a bond. Of course they don't have to do that - but then there are consequences. And one of those might be that you don't choose to be at their beck and call when they decide they can be bothered.
It's awful when you feel rejected - try not to take it to heart.