Your grandfather's siblings are not your ancestors, so if you are color coding your ancestors the program is operating correctly not to color code your grandfather's siblings.
There is a slightly more complicated procedure you can use to color code you ancestors and some of their descendants.
At this point, you are in a marking and unmarking dialog. RM will have defaulted to the first person in your database in alphabetical order rather than to your currently highlighted person. So first move to yourself in the list. Having done so, do the following.
Mark group->Ancestors of highlighted person
At this point, choose Ancestors and descendants of ancestors and set your generations the way you want them. Click Ok twice and you should be done. Make note of the fact that to get your grandfather' siblings, you would have to color code your great grandfather and one generation of his descendants. If you don't want your great grandfather color coded, you would have to mark him and one generation of his descendants, and then unmark him. There are many useful things you can do by combining marking and unmarking that you cannot do by marking alone.