I agree you know your daughter best, but don't underestimate her. She may find it very helpful to see both of your parents while they are in the hospital. So many times we want to protect our children, but then all we leave them is their imaginations. They can imagine things as much worse than they really are You could take pictures of your parents to show her, and then ask if she wants to see them in person. She is already grieving a loss if she was used to seeing the every day, and now can't. Also, if prayer is an option for your family, it might help her to be able to pray for her grandparents, give her something she can do for them. Keeping her busy is a good idea, but not so busy that she gets the impression it's not ok to speak about her feelings, and that feeling sad or angry is bad. It is also ok to let her see your feelings of sadness, if you are always upbeat she will think there is something wrong with her feelings.
I understand this is a terrible time for your family, but she can get through it. My son was 4 when his father died. He had cancer, and died in our home. My son was there for every step of the way from death to funeral. He is now almost 6 and it does not appear to have scarred him to be so involved. Actually, Hospice was the one that made sure my son knew what was happening as my son was dying. We go to a kids support group called Brooke's Place, here in Indianapolis. One of the great things they have is a Volcano Room. There are phone books kids can tear up, and swim noodles they can hit the wall with. The kids love it! Gets their anger out in an acceptable way.
Good luck to your family.