I also suspect a partially-engaged collar best explains the varying diameter of the nickel--nice error!
I would say it's either a cupped off-center strike, or a cupped broadstrike. I would go with cupped off-center because a tiny portion of the lettering is missing/falling over the edge. For a cupped broadstrike, all of the design should be retained. Take a look at these: http://www.error-ref.com/?s=Cupped
The nickel is a cupped off-center strike. You can alternatively describe it as an off-center strike combined with a stiff collar error. The collar resisted depression and generated both the cupping and a deep collar scar.
Great error coins, and an even better story on how you ended up with them. Those tweezers or forceps have no protective coating were they're contacting the coin, it could lead to scratching or damage. Even with error coins, condition is very important to its value. It's best to use white cotton curstor's gloves when having to handle a coin on its faces. All other times it's best to hold the coin by the rim.
I don't think those coins were ever spent. I think they may have came directly from mint bags. The OP stated that his grandfather worked on coin counting machines, in the 70's most main banks had their own coin rolling machines and got their coins directly from the mint in bags. My banks main branch still does this. There is a machine in the lobby for customers, but they have a much larger machine for their use. If he worked for a mantenience company, I can see where he would have worked on these machines too.
Thank you for the information. At least I did not scratch it I will be sure to get some forceps with protective coating and some cotton curator's gloves. The silly thing is I have been told this before, so I don't really know what I was thinking. Thank you.
you'd think I'd learn from posting so quickly with my phone. My phone corrected what a meant to say, which was *curator's* gloves...LOL..no idea what curator's gloves are.