Xiao Youxue's grandmother Shui Yisi was from the Eternal Ice Palace while her mother played a minor role so her name was never mentioned. Yes, many readers got a little confused due to the big gap in the timeline.
It was because while Shui Yisi had a grudge against Shui Yixian but she couldn't do anything while her protege mistress and eldest protege sister Shui Yichi were alive. But her will for vendetta would only take place in the third generation, that's Xiao Youxue story.
As for Xiao Youxue later ending, I can only say, you are a very good guesser =) But someone else is even more tragic...