Hello Twinky
firstly, really sorry to hear about your granny.
I work in this area and I hope I can offer you some advice/reassurance.
It sounds like your granny is currently in a 'mainstream' Nursing Home, ie one that is registered to take various types of clients but not persons suffering from Mental illness/ dementia. Hence they are legally not allowed to keep people who may be aggressive or pose a risk to themselves or others, or need specialist mental health care. Some nursing homes who cater for 'frail elderly' people can and do look after people who also have dementia but only if the dementia is not causing them high levels of distress, agitaion, aggression etc.
If a client has dementia we would always, if at all possible give them the chance to live in a more mainstream home as they are generally less restrictive and 'easier'places to be, for obvious reasons.
It seems like the social workers etc have explained that if your Granny becomes more aggressive they may need to consider using a section of the mental health act to bring her into hospital. Please please do not panic about this as a section can and would only be used as a 'last resort'. There are extremely tight rules and proceedures about how and when a section can be used and if a person is sectioned there are alots of systems in place (much more than for 'informal' patients!) to make sure they are getting a high standards of care, and the section is reviewed regularly.
A section would only be used if your granny was considered a risk to herself or others, and they felt that she needed a period of assesment or treatment in a hospital, and very importantly, she refused to go to the hospital voluntarily . If she did fall into one of these categories and would not voluntarily go then there would be no choice but to use a section as otherwise she would be illegally deprived of her liberty.
Obviously it is difficult to judge but it may be that the people involved in her care may have wanted to inform you of all possible eventualities. It doesn't sound from What you ahve said that a section is imminent at this time.
Have the workers explained why they are considering admission if the owrst comes to the worst? in my experience this is ususally done if they want to assess the condition in more depth or possibly try using medication to help the individual, under the safest possible circumstances.
An alternative to hospital might be an EMI registered nursing home (elderly mentally infirm) but again if she refuses to go they may have to use a section for legal reasons.
It is a deeply distressing prospect and I really feel for you . I can only speak from experience but hospital is not always a terrible place and sectioning is not often like the media seems to portray it.And it there to protect peoples rights as much as anything else.
I think If I were you i would be inclined to ask for a meeting with her social workers and her psychiatrist as soon as possible because there is no substitute for a face to face chat. Does your granny have a CPN? If not it may be useful to ask if she could be allocated one.
Good luck