Hi Peaches&moo - welcome to Talking point
What you describe seems to be, from reading the posts on here and from my own experience with my Mum in law, very common.
The first thing I am going to suggest is that your Nan is checked out for a UTI (Urinary tract infection) as any infection, but especially a UTI, can cause major additional confusion and delusions. Even with no other symptoms, its the first thing I check for when my Mil has an upswing in behavioural issues. With Mil, its not so much that delusions/hallucinations increase in number, its that they cause her more agitation and upset, and we get verbal aggression and disruptive behaviour as a result of them, when there is an infection present.
However, even without an infection, My Mil often says that there have been people in our house, usually wanting to know where they have gone. Often, she looks for non-existant children who she thinks have suddeenly vanished, or she asks for people like her late in laws, her late parents or late husband - she is utterly convinced that they were 'here' just a short time ago, insisting that I have made them a drink, or had been sat taling to them with her. Good advice, if its possible and if the delusions/hallucinations are not upsetting the person, is just to go along with them - to the sufferer, these 'people' being there are absolutely and totally real, and you may find that arguing they are not can cause a lot of upset and agitation. For us, I try to distract Mil - the reason for this is that she often used to suddenly 'snap back' to reality and remember herself that the person she thought was there had passed away, and then she would get upset because we had 'lied' to her - It doesn't happen as often now, but you will know if this is likely with your Nan.
If these 'people' are causing your Nan a lot of upset, and there is no UTI, its also worth checking if there is any medication that can help her with the delusions/hallucinations - 18 months ago Mils delusions were so bad and caused her severe upset to the point that we feared she would either have a heart attack or stroke, or put herself in danger by her reaction to them. Because of this, we felt that it was worth the risk of the potential side effects of such medication, in order to try and bring her some relief from the constant fear and agitation the delusions (combined with sundowning) caused her. The meds haven't stop the delusions completely, but for the most part, they have 'toned' them down so we don't get the same level of agitation and manic responses we used to have to deal with.
HTH, and good luck