That is so, so sad. As traditional Koreans, my parents initially were very resistant to me marrying a Caucasian, but they eventually came around. And I have been grateful that my husband's parents have been receptive to me from day one. 

It's hard to imagine a grandparent shunning grandchildren; clearly whatever your FIL is carrying runs a lot deeper. It's a loss for your kids and also for him; I can't help but think that he ultimately will feel immense regret about not getting to know his descendants.