Marc, how wonderful that you are helping your wife care for your father-in-law.
When one asks "What can I do to help," he wants to feel involved.
Think of all Marc, start a TO DO list, NOW!
the things that need doing around the house.
Wash the car.
Help make meals.
Help clear the table after dinner.
Go for a walk with the grandchildren.
Fold the towels from the laundry.
Organize tools (or screws, nuts, and bolts) in the garage.
Give a back or neck massage. Hands on contact allow for conversation and connection through touch.
This leads to the importance of sharing stories. When Grandpa is no longer here, his grandchildren will wonder:
*How did Grandma and Grandpa meet?
*What was the most mischievous thing Grandpa did as a child?
*If he is an immigrant...What was life like in Grandpa's native country?
*What did Grandpa think about his parents? Were they strict?
Some of what Grandpa shares may be factual. Other parts may be made up. However, the stories will be family treasures to remember--especially, once dementia takes its toll. Until then, repeat the questions. He may experience a moment of lucidity and the facts will shine through!
As for his thankfulness...WOW! Can you loan him to me for a week?
In answer to your second question at the end of your post...
Given how much progress dementia research has made over the past decade, his diagnosis of "dementia" may be due to a specific cause--such as Alzheimer's. I recommend getting him reassessed at a geriatric assessment center. This will give you greater insight as to his condition and what you can do to help him and what you may expect.