It would be ungrammatical and very awkward-sounding to say, "One is passed-away brother's grandson and the other is passed-away sister's grandson."
That said, I cannot opine as to which term is "better" sounding. The dictionary definitions of both terms reach the same conclusion---cessation of existence---though each term also carries different connotations and “emotional overtones": "dead" is, for some people, perhaps, more clinical, emphatic, final, and ... blunt; while, "passed away" is euphemistic, less direct and final, and perhaps provides some emotional “cushion” to what can be a traumatic event for those who are still “living,” and “left behind.”
Dead adjective:
1. no longer alive.
• "a dead body"
synonyms: passed on/away, expired, departed, gone, no more;
late, lost, lamented;
Merriam-Webster dead
Pass away intransitive verb
1: to go out of existence
2: die
Merriam-Webster pass away