The boundaries for our kids, until they reached the age of consent, was "NO."
No, you may not take a photo of my kid and put it on the internet. No, I will not sign a release form giving you (schools and summer camps) permission to put my kid's photo up anywhere. No, I once ripped a photographer from the local paper a fresh one for trying to take a photo of my kids (then, quite small) in their admittedly adorable halloween costumes without asking my permission first. No, no, no.
Fortunately, we barely preceded the era of everyone being on Facebook, but the answer is still NO.
Seriously, there are so many ways for this to go south. Think of it as a way to set some boundaries with the grandparents and have the opportunity to think through consequences ahead of time. Can't avoid taking pictures of the grandkids and posting them? No more visits for you. If the grandparents are not alert to the dangers of overexposure on the internet, this is a chance for them to get educated. If you really want to freak them out, look into pedophiles on the internet!
Your house, your baby/kids, your rules.