It is not possible to have a relationship with a narcissist. You do not have to make a song and dance about lowering all contact levels either; just make yourself over time more and more unavailable to her. If she calls do not answer. If she turns up at your home you don't let her in. Your mother is very much a past master of, "come closer so I can hurt you again".
Do read Toxic Parents by Susan Forward and have a read too of the website entitled Daughters of Narcissistic Mothers. You have really been trained by her to serve her and put your own needs last. She really does see you as an extension of her but you are your own person completely separate. You do not need her approval either, not that she would ever give you this in any event.
Many adult children of narcissists fall into the trap of wanting to believe that their parent will somehow behave better when they become grandparents despite their own experiences to the contrary. Stop hoping she will become a nice decent parent and grandparent now, that will not ever happen. It is not your fault she is like this and you did not make her that way.
Ask yourself this too - would you tolerate this from a friend, no you would not. Your mother is no different.
If she is too toxic for YOU to deal with, its the same deal for your child too. Your mother has not changed in all these years, she is still a narcissist. You also need to protect your most precious resource here i.e your child from your mother.
She was not a good parent to you when you were growing up and narcissists also make for being deplorably bad as grandparents too; you've already seen her speak to your son in a derogatory fashion re you as his mother. You will be in for more of the same going forward if she is at all allowed contact with you and your son. She will indeed use him to get back at you. If the other set of grandparents are nice and importantly too emotionally healthy, concentrate your efforts further on them.
Your narcissistic parent will not be warm and supportive of your parenting. Why would she? Your narcissistic parent has never supported you—unless it served her ends. Children are all too tempting targets for your narcissistic parent. Children, especially young ones, are trusting of grandmas and grandpas. They’ll listen to the lies your parent tells them about you. Lies about how terrible you’ve been to them. Your parent will weave tales about what a horrible child you were and how they gave you nothing but love while sacrificing their own welfare for you. What she will do is turn your child against you.
But that is not all the danger. Children learn by watching and listening to the adults in their lives. Your child will learn from their narcissistic grandparent how to be manipulative, deceitful, and selfish. And that is truly no legacy to leave your child.