J-1 expired August 31st. Can I still apply for H-1 b Cap exempt visa as I got my hardship waiver approved on Oct. 26.

If you are not in valid, nonimmigrant status, you cannot file for change of status.

It is unclear if you are in your J-1 grace period or has that already elapsed as well?

Your waiver has nothing to do with your authorized stay in the U.S. If your status expired on August 31 (I assume, your status was limited by the visa expiration date), you started to accumulate unlawful presence after that date. You cannot change your status if you are not in valid non-immigrant status now, regardless of whether your H1B is capped or cap-exempt.