A sort of similar situation - my Mil had been prescribed an ever increasing dose and combination of anti-psychotic drugs to deal with her worsening verbally aggressive and paranoid behaviour and delusions, and was admitted to hospital so that the medication could be withdrawn and a new regime of medication could be introduced, if necessary. She was placed under a section 2 within a couple of days, and another few days after that, she was transferred to a medical ward as she had a UTI and chest infection. 2 days after being moved back to the EMI ward, they tried to discharge her, with less than 24 hours notice, and without having done anything about the anti-psychotic medication, or carrying out the assessments set out in their own discharge policy. I was told that she was now on the optimum medication (though they hadn't actually changed anything) and her behaviour was managable. We argued, and threatened them with formal complaints, threw in phrases like 'duty of care', 'failure to follow procedure' and 'failed discharge'. Faced with that, they agreed to keep her in for another 'week or so', though their attitude stank and they used all sorts of emotive comments to try and get us to agree to discharge. Throughout, their attitude was that she 'was quite settled' and that there was no evidence of the extreme paranoia and verbal aggression that we had witnessed.
There was 'no evidence' at this stage, beause Mil was pretty much in 'hostess mode'. Like so many PWD's, she had the ability to present incredibly well, particularly when faced with people she considered to be authority figures - doctors, for example. She was also in an environment, like your grandmother, which was routine orientated and away from us - me in particular, as I believe that as her main carer, I had become (in her paranoid mind) the person responsible for all the confusion and misery she was experiencing. So, while it was clear that she was confused and had severe memory impairment, the paranoia and aggression just hadn't materialised.
It took about another week before the hostess mode started to slip, and the staff at the hospital started to see and experience the level of agitation that we were getting at home. It didn't take long before even the senior staff, who had been very vocal in their insistance that her behaviour 'wasn't that bad', were telling us that they couldn't believe how verbally nasty she could be, and how resistent she was to any form of compassionate communication or distraction, how paranoid she was, how bad the delusions were. Urging us to agree to discharge very quickly changed to them urging us to look at suitable residential care, as they experienced for themselves what we had experienced with Mil at home. She was very quickly placed under a section 3.
So, I guess what I am saying is that although the hosiptal might put a lot of pressure on you, and try and force you to agree to discharge, if you possibly can you need to stick to your guns. In my experience, being in a new environment, and particularly with new people, pwd's can and do present very differently to how they usually are, until the new environment becomes more familiar and until they drop the host/hostess mode. There needs to be time allowed for this, but (I guess understandably, to some extent) hospitals are under pressure to empty beds and cut costs, and are reluctant to give this time. Its horribly hard, but you have to force them to do this. We sat through a meeting where the consultant and ward manager hammered us repeatedly with a list of all the potential negative aspects of Mil remaining in hospital, about how she would have more falls and get 'more infections', with the clear implication that it was 'up to us' whether or not we 'put her through' all of that. Emotional blackmail is not too strong a term to use, and it was so hard to stay firm.
Sending you Good luck wishes and much sympathy - it's an awful situation to deal with x