"I just thought maybe I was being a bit mean to deprive them of seeing their grandchild".
No, that is really your inbuilt conditioning talking. Also societal convention can play a role here too.
It is important to keep in mind that if they are too toxic for you to deal with, they are FAR too toxic for your vulnerable and defenceless children. Toxic parents do not make for being good grandparents, she is already badmouthing you as a parent to your child. Do not allow that to keep happening!. Boundaries need to be strengthened here as well as maintained.
Many adult children of toxic parents feel torn between their parents’ (and society’s) expectation that grandparents will have access to their grandkids, and their own unfortunate first hand knowledge that their parents are emotionally/physically/sexually abusive, or just plain too difficult to have any kind of healthy relationship with.
The children’s parents may allow the grandparents to begin a relationship with their children, hoping that things will be different this time, that their parents have really changed, and that their children will be emotionally and physically safer than they themselves were.
Unfortunately, this is rarely the case, because most abusive people have mental disorders of one kind or another, and many of these disorders are lifelong and not highly treatable. (Others are lifelong and treatable; however, many people never seek the necessary help.)
The well-intentioned parent ends up feeling mortified for having done more harm than good by hoping things would somehow be different — instead of having a child who simply never knew their grandparents and who was never mistreated, they have an abused child who is now also being torn apart by the grief involved in having to sever a lifelong relationship with the unhealthy people they are very attached to.
No contact is precisely that, if your mother cannot behave then she gets to see neither of you.
You do not have demons within you, your mother instead does. She is basically projecting all her toxic crap onto you and is not above using your child to do this either.