I'm so sorry to hear of the loss of your grandfather. My thoughts and prayers are with you and your family right now. My grandfather passed away in 1994, right before Thanksgiving, and not a year passes by when I don't wish he was there at the table with us.
I have never ever heard of pictures being taken at a funeral. My uncle owns a funeral home, and I have never heard of or seen this. But to each his or her own, I suppose.
That picture is so cute, of you with your grandpa, cherish it, and the times you had together always.