While I didn't live in a foster home... my parents were foster parents (and so I grew up with foster sibs in our home), and I have been a foster parent as well to a niece. I have students who have been adopted by wonderful foster parents, in sibling groups. I have a coworker who has also adopted 3 different sibling groups that came to her as foster children. I beg to differ that it would be difficult to find a "loving environment" for these children. Hard to find someone who would take 14, for sure. I think they would be able to find homes that would take them in groups of 2 or 3, at least.
I'm also a former social worker.
Yes, there are crappy foster homes. But guess what? There are crappy biological homes too. I've heard horrible, sickening stories from 7 year olds about their biological parents.

It is such a sad, sick situation. The grandma is in a no-win situation, and she'll be slammed no matter what she does. I do think it's best if she could at least keep a few of the older kids, especially the autistic child. I don't blame her for deciding to go tough-love, though. It seems she's been doing all the work. The mom is clearly mentally ill, and almost certainly faces some very serious issues with her worker's comp case (you know they'll be thinking- your back is well enough to carry 7 pregnancies, including 2 multiples- well enough to return to a desk job at least, eh?). I would bet that her college is going to look into the student loans as well. In this economy, all that money is sorely needed by folks that are actually going to use it for their intended purpose.
The newborns though, I'll be surprised if all 8 are released to the mom. I'm certain CPS will monitor
very, very carefully how the first few that go home do. They need to wait for her to fail. And they will. It would reflect very, very badly on them if one of those preemies died at home because she couldn't recognize their breathing troubles/illness/infection quickly enough because she was busy with the other 13. Who among us could care for 14 children under age 8, including 8 high-risk preemies? With no hired help or large family to support you?
They're better off being split up, sad as that might be.