I believe XBox Live (the online gaming network) is $5/month or something like that. So if you want to play with the grandkids, I'd go with the Xbox. I think Xbox live has fewer issues than PS3 online network anyway. I'm guessing the Xbox at Shopko is 40gb, not 4gb. And that is just storage space - so if you're just planning on playing Madden and maybe a couple other games, the 40gb version is perfect.
I personally have a PS3 - it also allows you to play Blu-Ray movies and offers some other bells and whistles that you honestly probably wouldn't use. As far as game play itself, only the most serious gamers can dispute the differences - so again, I'd stick with the Xbox so you can play with the grandkids. You have the monthly fee, but it will take a couple years before you've spent more than you would have on a PS3.
Probably the best idea is to tell your grandkids what you're trying to do, and let them advise you. They're the experts.