Interesting perspective, Shawn. I think of Oriental the same way as the term "colored" was used to describe Blacks. It's an incredibly outdated term that was initially used neutrally but took on a more negative tone based on how it was used by many racist people. You need to consider the history of the term and not just its literal definition.
It sounds like your grandmother grew up with that term and used it neutrally. I hope she stopped doing so once she was informed that many people find the term offensive.
To me, respecting someone's request to not use an offensive term speaks loudest. I think the government's effort to stop using offensive terms signals something positive. It means we are being heard and the government isn't promoting or silently allowing offensive terminology to continue to be used. It's not as if the government made it a CRIME for individuals to use the term. They simply banned the use of the term in federal reports.
I also want to respond to this quote, "Regardless of descriptions, Asian people cannot take away that they look different, sound different, and come from places far away from America." I hope you know that Americans of Asian descent have been in the U.S. for hundreds of years, even before we became a nation. Yes, there has been a surge of immigrants from Asia since 1965, after the racist immigration laws were changed (which limited who was allowed into the country). My kids are 6th generation Americans, as my husband's family immigrated from China more than 100 years ago. My kids may look Asian, but they definitely sound like regular Americans and "came from" the local hospital here in California.
Finally, on a related note, many people refuse to change their language when asked to do so, even when we tell them it's because we want to be more inclusive. This still happens today in 2021. Some people resist efforts like announcing your pronouns. I am happy to share my pronouns in an effort to recognize that one shouldn't assume pronouns. We may have non-binary or trans colleagues who are uncomfortable being the only ones to raise this issue. My additional language use is intended to be inclusive and I think that's what we have to think about when it comes to language. I hope future generations continue to be thoughtful about how we use language to include or exclude folks.