There is no reason not to believe Grandmother's stories. She very likely came w/lots of personal history and a rich heritage. In her younger yrs her memories were too painful to share. As she got old, time had done some healing, and her memories became easier for her to pass on to her descendants..
The Melnikovs even come w/a coat of arms.
http://commons.wikimedia.org/wiki/File:RU_COA_Melnikow_11-74...==============================================
You need to get an inquiry at Bad Arolsen going ASAP. That will provide you w/a better timeline and hopefully we will be able to move your research to Poltava and Rostov.
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What happened to Grandfather after his arrest? What was his full name?