Some girls concentrate all their reading on Seventeen, Cosmo, Glamour, YM, and so forth. This gets them information they find useful. They know how to read; they just don't read things some people consider culturally valuable.

Cultural literacy is a little different from functional literacy. I bet your girls are highly functionally literate, and probably are more culturally literate than would seem possible from a casual perusal of their reading habits.

Your grandson has conquered functional literacy, and is well on his way to cultural literacy. Your big problem is going to be finding reading level-appropriate material that's also a match for your little guy developmentally. The way we solved that with our kids was to let them pick up anything they felt like. If it was developmentally over their heads, even if they could, technically, read it, they got bored with it inside of a chapter, or they got something entirely different out of it than the author had in mind.

Make sure, if you do this, that you read all comics and graphic novels yourself first (pictures are different), and that your Henry Miller collection is in a sealed box labelled "Doll Clothes". ;)

Good luck!
Best regards--
Mary Anne