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You might have better luck going through your Congressman's office. Could be a little faster.
I'm not sure about the Navy, but Army regulations entitle the vet or family to one replacement set of medals at no charge.
If you don't go the congressional route, write the National Personnel Records Center, 9700 Page Blvd, St. Louis MO (don't have the zip handy, but a call to the post office should get it for you). In the letter give your grandfather's full name, sevice number if you have it, date's he served and the circumstances of the loss. You may have to provide some documentation if he's passed on, such as death certificate and something proving you are next of kin, making you entitled to a replacement set. Be prepared for a long wait, 9 months to a year or more. They have all the records there there and like a lot of agencies are understaffed, when it comes to people to do the grunt work.
HTH
Jeff
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