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If you go to Toys R Us they do make books that read out loud to kids nowhere near $100. You're not going to find a reader that does it and it's not worth spending the money on a kid that's going to break it in all likelihood anyways. Buy a book that reads out loud. Look into the Leap Pad. It plays games and reads books and teaches kids all kinds of things. A reader is in appropriate for your needs based on your OP.
Get a reader for the Grandmother. She'll appreciate it and know how to take care of it.
An eink ereader is completely in appropriate for a kid that wants games.
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