I think it's a lovely idea, even if you're not deliberately naming your child *after* another family member (ie, you just happen to like the name and it just so happens there's a Jennifer in the family who, sadly, is deceased). But on the other hand, I can sort of see your DH's perspective - maybe he's worried about being seen as disrespecting the baby's memory, or that it might be a 'bad omen', so to speak?
I'm sorry, I'm not sure what you should do :/ It's a tricky situation. Maybe if you and your DH can sit down with his grandma, talk openly about everything and see if maybe that changes his perspective on things if he can see that his grandma is comfortable with the idea?
Good luck with whichever direction you go in, I hope you find the perfect name soon (if you're not already sitting on it, that is )!