My 22 year old daughter has signed over permanent custody of her 19 month old son to her mother and I in a noterized letter. Where do we go from here to assure his well being and make sure all is legal.

You find an attorney who is versed in Family Law. Show him (or her) that notarized letter and go from there. I am afraid that your daughter signing that letter is not enough to guarantee that your granddaughter can stay with you. There is a formal procedure for your daughter to terminate her rights. So please, contact an attorney ASAP, and good luck.