Tough call!!!!
At 10 years old, my first thought was that, even with your DD's condition, that she SHOULD go. She needs to be able to live her life without undue stress and being attached to mama.
At 8 years old... NO, I would not expect her to go.
So, it sounds like an 'on the fence' situation.
I would want to base it on what would be realistic for your DGD... NOT what DGD seemed to want, based on fears. If she would be able to go and somewhat enjoy it, without having meltdowns, anxiety attacks, etc... I think that she should definitely go.
I agree with Brianmom above. I would not want her to be allowed to let her fears limit her life, and to whimp out and stay and hold mama's hand.
PS: I would also would give NO consideration to MIL's expectations... NONE whatsoever... Period. Granny should have NOTHING to do with it.