You are in no way over reacting AT ALL! Trust me, you have the right to be angry.
I'm in the same boat as you, though my situations not nearly as bad, I guess. My father died in a train accident two years ago, and my mom is engaged to her boyfriend of three months. Geez, our stories are similar, huh?
I'm so sorry about your mom and about the problems with your grandmother right now. Only seven months after your mother's death is too soon, in my opinion.
...and does your father seriously call those "mental issues"? That's just not right.
I hope things get better with you, and feel free to PM me or Email me, if you want to. In fact, I should go see if I have those enabled... :)