My parents have a wonderful custom of taking their grandchildren to Israel for their Bar/Bat Mitzvah. I have found out that they spoke with an Orthodox Rabbi in Israel and he gave them a heter to only hold one day Yom Tov while they are in Israel. Is there a heter to hold only one day Yom Tov in this situation?

There is an isolated opinion (contrary to the bulk of responsa) that anyone in Israel keeps one day. You and not your parents are responsible for your children's education and religious observance. Call the rabbi they consulted, hear for yourself exactly what he told them (sometimes Psakim get garbled when they are passed on by word of mouth from one person to another) and on what sources he relied and then consult with a rav who knows you and your family and make the decision for your children on the basis of what he tells you. It is not enough to know that a solitary opinion exists that backs keeping one day for you to decide that this is OK.