I am in the same boat. My understanding is that you are correct. 2 separate applications: one for parents and one for your grandmother.
As with the envelope, I am planning to submit two different envelopes and include the same invitation letter in both of them. Also explaining in the explanation letter that this application is only part one of the two.
My main reason for sending two envelopes is the following sentence from the application guide (step 4 submit application):
"We don’t accept multiple applications in one package"
I have also called a CIC agent and she had NOOOOO clue about this. So I had to read the guide to her and point her to different places. Then she agreed with me