Here's a better way: "I could still remember what my late grandpa told us". Or "I could still remember what my grandpa, who as passed away, told us." Or "I could still remember the words of my grandpa, who has passed away."

The confusion is between active and passive voice - your grandfather passed away, ie. he did the action. So Mr Wright's "I could still remember what my grandpa, who has passed away, told us." is what you need. "Passed away grandpa" uses passive voice, ie. the action was received. Someone else passed your grandpa away. Sound weird? Yes it is!! If you use a past-tense verb in the adjective position, it is usually passive. Eg. the eaten lunch, the baked bread, the unemployed man... these all received the action; they didn't do the action.

Mr Wright is right!