I tend to keep my grenadiers behind the line as a tactical reserve; in the heat of battle between the two bodies of line infantry I like to sneak them through to lob grenades on any dense concentration of enemy troops. They can also plug the line in the event that a line unit breaks (I find the AI does tend to try to concentrate its fire on a single unit rather than spreading it along the line).

Otherwise I find they work quite well on the flanks to guard the cannons from cavalry; the small unit size is actually an advantage in a way against cav, since they can turn and form up quicker than line infantry to catch out annoying cavalry units trying to nip around the flanks.

Incidentally, when using grenades a little micromanagement is in order; after they throw their bombs, I find it best to immediately have them run forwards or backwards to avoid the bombs that some of your guys will have dropped at their feet.