Interesting philatelic-numismatic cover (PNC) you have there! Though I'm primarily a coin collector, I do have some stamps in my collection and enjoy combining stamp collecting and coin collecting when each offers a commemorative for the same person, place or event.
I have a number of PNCs in my collection -- some with coins, some with medals. I don't recall seeing this particular cover before, but I have seen others by the Medalist Cover Society offered on
ebay from time to time. Fleetwood put out a variety of first day and event covers that featured
US coins and medals along with corresponding US stamps; the Medalist Cover Society "brand" was one way they issued such items. Now that Fleetwood has been bought by Mystic Stamp, I'm not sure they are still making PNCs.
You rightly call the piece a medal; it's definitely not a coin. It appears to be a nicely executed, attractive medal that would fit nicely in almost any coin collection, especially one that includes commemorative coins.
I hope you enjoy owning it and remembering your grandfather through it!