All perfect praise be to Allaah, The Lord of the Worlds. I testify that there is none worthy of worship except Allaah, and that Muhammad is His slave and messenger.
No decisions should be based on this dream as it may not have any relation with Istikhaarah at all. The Istikhaarah has nothing to do with dreams and it is not a condition that the person who performs Istikhaarah sees a dream as we have already clarified in Fatwa 84934.
It should be known that the most important thing that could be an indication on the result of the Istikhaarah is whether or not the matter is achieved successfully.
Besides, the concerned person is the one who should perform Istikhaarah himself/herself and not someone else who would perform it on his/her behalf as we have already clarified in Fatwa 132810.
Accordingly, if this young man is religious and has a good moral character, then it is more appropriate to accept his proposal to that girl especially that they have ties of kinship between them. In fact, refusing such marriage has evil consequences such as the anger of the grandmother as you have mentioned in addition to severing the ties of kinship which may happen.
If there is something that necessitates refusing this suitor from the perspective of Sharee'ah, being dissolute and the like, then one should treat this matter gently and try to treat the negative effects which the refusal may entail.
Also, wise and righteous people should endeavor to reconcile the family members, seeking Allaah's help to facilitate this task. Allaah says regarding the virtue of reconciliation (what means): {No good is there in much of their private conversation, except for those who enjoin charity or that which is right or conciliation between people. And whoever does that seeking means to the approval of Allaah - then We are going to give him a great reward.}[Quran 4:114]
Moreover, Abu Ad-Dardaa’ reported that the Prophet said: “Should I not tell you about what is better than the degrees of fasting, prayer and charity?" They said: "Yes." He said: "It is to reconcile between people, for spoiling kinship ties between them is the shaver (i.e. removes the person's religiosity)." [Ahmad and Abu Daawood]
Allaah Knows best.