Hi Jennifer:
Barring extraordinary circumstances, I always advise everyone to take it easy and get settled in on the first day of a Disney vacation. This is especially true if you are traveling with a toddler and grandparents. Traveling wipes me out, and is even harder on younger and older members of the family. Since you are making it a Resort day, consider dining at your Resort's restaurant, if it has a sit-down restaurant.
I remember loving the luau when I was young, but not being as fascinated by it as an adult. Your toddler may enjoy it just as much as I did when I saw it as a six year old. I much prefer the Hoop-Dee-Doo Musical Review (a vaudeville-style dinner show with a country twist). But again, with older and younger members of your party, it may be hard to enjoy a dinner show on your arrival date. But if you think you'll be up for it, my vote would be for Hoop-Dee-Doo, unless you are staying at the Polynesian Resort or a Resort located on the monorail.
If you want to venture out of your Resort, maybe head over to Downtown Disney and
dine at one of the restaurants in this entertainment area. Raglan Road (a modern twist on traditional Irish pub food) is my favorite. T-Rex may be too loud for the younger or older members of your party if they are sensitive to loud noises.
Enjoy your vacation.