I see now that this was posted in January. I missed it the first time around. I hope shotzey will update us.
I'd say you need a highly qualified professional trainer to help you. A child's face and the dog's life are at stake. Books and advice from this forum can be excellent, but IMO this situation is too complicated a situation for you to depend solely on remote resources. You need a very knowledgable person, a true expert on dog aggression, to evaluate the dog in the flesh and tell you what can be done. I'm sorry. This is very, very serious.
As far as books go, Agression in Dogs by Brenda Aloff is great. Again, a book is not enough, but it can give you some useful information and also serve as a litmus test to know if a trainer you are considering is actually going to be helpful or not. I would go so far as to say, if a trainer is not familiar with Aloff's book on aggression, then you should be cautious about hiring that person for this issue.
It's not absolutely true that every single knowledgable trainer has read Aloff's books. For instance, I know someone who is an expert, who does have the skills to help a dog owner in this situation, who has been training dogs all her life, and she doesn't necessarily read all the new books that are published. I would trust her, because I know her, and I know what she can do. But Aloff's Aggresson in Dogs is, in my opinion, the standard work -- the bible (with a little "b"), if you will -- on the subject.
Good luck with this. A friend of mine had to put down a beloved family pet in a similar situation. I'm not telling you that's what you are going to have to do. I certainly hope not. I'm just saying, that's what the stakes are. If you should have to choose between the dog and your grandchild, the decision is clear. I hope it hasn't come to that, but it's a possibillity.
And if you should transfer ownership of the dog, please please please make sure that the new owners know exactly what they are getting and that they are equipped in every way to handle it. Do not minimize the issue, because it could be someone else's grandchild who gets hurt.
Again, good luck. I'm so sorry for what you have to deal with. I know you love the dog, as well as your grandchild.
try looking for a book on introducing kids and dogs And handling the bad behaviors and the signs of. Your dogs possessive of you Also. you need to research how to deal with that aspect as well.
best I can offer.