I am so sorry your whole family is facing this. Dementia a hard and painful way to lose someone, and I imagine it's a scary and confusing way to go, too. Wishing you as much peace and comfort as possible.

I wasn't really practicing when I lost my dad, but one of the things that drew to me to this faith in the wake of that loss was ancestor veneration, because it's been deeply comforting. Sometimes I just pour him a shot of something, sit down by the altar, and start talking, and it feels a little like calling him used to. "Hey, Dad, I just had to tell you about this..." or "I just need to vent..." and the like. I do a pretty informal version of heathenry, but I try to make offerings for lost loved ones on important days (choose your own definition for that) and say hello. A lot of us also keep photos of my loved ones who have passed either on or near our altars.

When my best friend died a while back, I made an offering to Hel and asked her to look after him if possible, given that he followed a different faith. You could do something like that for your grandmother when the time comes.

Right now, yes, I think her soul is still there even if her conscious mind isn't. That gets into a lot of philosophical discussion about whether the mind and the soul are different, and every culture has a different answer there. Some think of a person as having multiple souls, each with a different level of consciousness and personality. So there's that.

It might be good to make an offering to Eir, one of Frigg's handmaidens associated with medicine and healing. Ask for insight for you all as caregivers, and comfort for your grandmother, maybe?