I forgot to add this, it's unlikely his friends at school will "find out" he sleeps with his parents. It's not like they are wandering the neighborhood looking in the windows.
If he wants to have friends over for sleepovers, he needs to sleep in a bedroom with his buddies.
Otherwise, his friends will never know.
Sandy, I would guess that you're confusing cause and effect.
You think his mom sleeping with him is causing his separation issues, and I think his separation issues are causing his mother to insist on sleeping with him.
Children who are confident and mature want to sleep by themselves at this age. Children who don't have those skills act the way your grandson acts, and it's not because the parents sleep with him. The parents sleep with him because of this.
I really think you need to back off and let them handle the parenting. He sounds like he might have long term issues that are completely unrelated to sleeping with parents.