My Grandma passed away the week before my ultrasound with Em. My scan was right after the funeral. It definitely did affect our choice in her name because she was going to be Emma Louise. She is Emma Josephine after my Grandma. I called my Grandpa right after the scan to let him know and he was so touched.

I would recommend going for the middle name. It is a lovely reminder without getting confusing, unless they decide to use their middle name as their preferred name later in life.