Both kids are in temp. care with child #2 biological fathers parents, is this okay being they have no relation to the oldest?

You fail to provide a lot of information, such as who you are in relation to these children, and whether the placement is by court order, consent or otherwise. You do not show any problem with the relationship, nor any reason to question it, or challenge it. In legal terms, do you have standing to bring any action? By this I mean, is the arrangement or children of any concern to you? If not, then absent some abuse, there is nothing you can do. If you do have some relationship, then what is that relationship, and what is the problem with this arrangement?

I agree this question does not provide enough facts to give even a general answer. I would suggest that you and/or any persons with standing to challenge this situation consult with an attorney. This allows you to explain the situation in more detail. It also allows attorney and client to ask and answer follow up questions and have a conversation. Issues of child custody are too important with too many variables to resolve with an online forum. I would suggest meeting with an attorney... many do offer free consults or reduced rates for the initial consultation.

Sorry, I don't understand the question at all. It might be easier for you to find a good family law attorney in your area, sit down with him/her, and discuss your situation in full. Bring any documentation you feel would be helpful to explain the situation.