I'm inclined to think that Casey didn't know for sure who the real father is and didn't want to know, and the family figured they'd take care of Caylee themselves without interference from anybody outside the family (dysfunctional families operate this way...nobody really accepted in the family circle, & nobody gets out, also lots of family secrets that nobody talks about).
If the father had died, seems Casey would have kept a photo, an obituary or something to show Caylee when she got older.
Do we know if the grandfather actually moved from the house for the two years they were filing for divorce?