Even though obsessive thinking is often indicative of a psychological problem, I think you’re describing a power struggle. Your grandson’s parents need to stop participating. They need to make themselves perfectly clear, and accomplishing that is going to require some “drastic” measures on their part.
Drastic Measures: When he’s at school, his parents remove anything and everything from his room that isn’t completely necessary, including favorite but unnecessary clothing. When he comes home from school, they sit down with him and inform him that he’s going to live that way until his inappropriate requests, tantrums, pouting, and the like have completely stopped for a continuous period of two weeks and that until that happens, he is also going to bed at 7 p.m. This “conversation” should last no more than two minutes, during which they should stick to the following facts: (1) Your requests are inappropriate (I recommend that they present him with a list of those requests). (2) We’re not going to buy you those things. (3) Because you obviously don’t appreciate the things you already have, you are going to live without them until your inappropriate requests have stopped.
If, during the next two weeks, a request occurs, or displays any of the manipulative, self-dramatic behaviors you listed, the two weeks begins anew. He should have his stuff back within six weeks. Those six weeks will be some of the most memorable weeks of his life. That is, after all, the point.
Family psychologist John Rosemond answers parents’ questions on his website at www.rosemond.com.