That's a good idea, but at least to begin with, go easy on the reciprocity or you will be teaching the girl how to manipulate. And when niece says, "I want her to trust me," - the answer is, "Honey - trust has to be earned. You did X, Y & Z recently, it does make it difficult to trust you. I want to trust you, I really do. Maybe we can work back towards a position of trust. What do you think?"
Developing some sort of contract between Niece and your mother could be good. Again, I think a therapist is needed, they could facilitate this.
And yes, grandpa has to be on the same page but I suspect he's taking the gentler approach because he instinctively feels it is working. Both your mother and your stepfather need to be on the same page, but which page is that?
When grandpa insists on the bad words about his wife being deleted form FB, he is indicating that this language about his wife is not acceptable.
As I said on your other thread, sometimes especially in the heat of the moment, kids will say mean nasty things purely to get a shock reaction. When the kid is hurting, they want to make other people hurt just as badly. It's a sort of "misery loves company" attitude and it takes time for the kid to realise it actually doesn't help at all. But they still get positive feedback from friends when the kid giggles at school or in private conversations, "I really stuck it to her, I called her X and she got so mad!" The shock reaction from friends (or the laughing reaction - also a facet of shock) gives them enough of a payoff. It's complex and can't be fought by merely clamping down.
How I handled it - with calmness and humour. Words are my trade (increasingly these days) plus I would try to plan ahead. Especially if the kid uses the same insults over and over, you have the opportunity to carefully plan how to respond next time. For example, the kid says, "Suck my [insert part of anatomy variable here]", my response is to stop, look at them quietly and then say one of two things: "Can you just see me doing that? What would it achieve? It's not really my thing." OR "Thank you - no. I have too much else to do. But if I ever get so bored as to even consider such a thing, I will let you know. Now, isn't it a good ting I'm such a busy person?"
The advantage to this approach - it takes the wind out of their sails on so many levels. They can't go brag to ANYONE about what they said, because at the back of their minds is your response. The people they would brag to will say, "And how did she respond?" leaning forward eagerly to hear juicy details, and it is very hard to keep up the "yeah, she was so angry," routine, when it didn't happen that way. This really does work.
Maybe it's an Aussie thing - we often throw insults at one another obviously in jest. There is a word (I think the site censor has banned it) which refers to someone whose parents are unmarried. We use the word a lot in Australia but the usage gives it a wide range of possible meanings, from close camaraderie to utter loathing. Someone can be "you b******" and you can laugh together. Or you could describe someone as a "miserable b******" and it does not mean they're sad, it means they're a low-down piece of dirt. We even have a charitable organisation called "The Order of Old B*****" which does a lot of really good fundraising for charities. Their founder was a bloke called Sam Weller, definitely a "cheeky b*****" in a nice way.
We have various expressions that tend to de-fuse an insult or turn it on its head. Being told "get to [name of unpleasant fictional place]" generally gets the calm response, "I been and I liked it. Your turn."
A common one in our house - if someone says in my hearing (or now my kids'), "This tastes like [insert unpleasant inedible here]" the response is, "my my, you do get around. I must confess I lack your culinary experience."
Humour can de-fuse hostility really quickly and in using it, you're teaching the child to de-fuse for themselves.
Marg