3 year old saying she was touched

I am going crazy,and wondering if anyone else went through this?My Grandaughter  3 yrs old was here for a week with her 2 year old sister visiting Grandma.I live with my better half,and he has been in our family since my Children were young over 20 years.
Now after they went home,My Daughter and I had a falling out,and did not speak for almost a month{not related to this}
We just started speaking again,and she informed me that my Grandaughter had a UTI and someone must of asked her if she was touched down there? She replied that my better half touched her with a fish hook,and the Monsters came,and the Ghost? when she was asked, where was Grandma? she said in jail with her youngest sister the 2 year old..
She also keeps saying this happened on a air mattress,which both girls did sleep on in our room.they were never out of my site,I gave baths,I wiped butts,My better half is not into that.We also took her fishing the first time in her life,we all went together.
I spoke to her today,and My Daughter said tell Nanny what happened,and she told me the same,only now her 1 year old Brother was there too {which he wasent just the girls}and this time the hook was in her mouth too,and she jumped out the window...
This has been almost a month since ive seen them,and the story is still there,only imagination add ons.She is crazy about my "better half" always asking for him on the phone,and wanting to come visit.
I am torn over this,I have not mentioned this to him yet,as i would be beleive it would destroy him,or he is not going to want to be around them again,Which i feel that way right now,maybe until she is older?
Has anyone ever gone through this?

[skepticalpeach]

I've never gone through that before and it's difficult to say what to do. My first inclination would be to talk to your better half about what she is saying. Just be really gentle about it and say that you aren't pointing fingers. If he doesn't want to see a 3 year old for saying things like that, that isn't exactly fair. Again I don't really know what to tell you because that doesn't sound good.

[suziet]

3 year olds love to tell stories.  Mine had so many stories at that age.  I finally told her she knew what was true and she knew what was a made up or pretend story.  When she told me something that I found hard to believe I would ask her is that a real story or is that a pretend story.  She always replied which was which.  When it was a pretend story I always told her it was a very good story.  Your grandaughter has made up a pretend story.  Your daughter was angry with you and asked her all kinds of questions until this story has become more and more involved when she answered questions.  If  you believe her imagination is on overload and this is a pretend story before you say anything to your better half the next time you talk to your daughter or grandaughter on the phone ask her if she is telling a pretend story or say that is a really good pretend  story and laugh it off  and say what a wonderful imagination you have you are so smart.

[venustiana]

I know a similar story. This was a little girl with her brother. The parents were very responsible and looked for professional help immediately and it fired them back. The professionals had to call CPS. They said is the law. All I know is that it took few years for them to solve that problem and both kids went to extensive counseling.
I think you really need to talk to your better have because this is a gigantic load you're taking on your shoulders. It is very hard but the 2 of you together can carry this load much better. You have to be strong and support each other.
Like other people said you have to find out if she knows the difference between a real story and a make believe story. It sounds to me like a made up story, you are in jail with her sister, monsters came out, the add ons...........hum...............
I wish you  luck, God bless you
PS. Is she talking about it all the time? Have parents noticed any changes in behavior (like aggressive, lethargic, moody, spacey, sadness, can't concentrate, nightmares)? These are real signs of abuse

[mc16]

I did tell my better half could not take it no more, and as i expected he flipped! he bought up questions to ask my Daughter, and as of now we are not speaking again {my Daughter and I} she does not want to deal with this no more,and feels she did him a favor by dropping it, We feel if it was not so serious or the child being led,then it should of never maybe been mentioned, If the Hospital closed the door on it, maybe My Daughter should have too?
I did however ask her to please take the baby  to someone {Therepist etc} and lets get some expert advice here, this is serious, cause it wrecked a persons life,and he feels he is labled for the future of people that may know.

I will never know if she took the baby to someone? and both of us are sick over this everyday.I guess good advice to everyone,is never have yourself in this position, where you could get blamed,and I know if this was my Daughter saying this when she was 3, I would of had her somewhere, not just drop it.....