Everything is Illuminated

I feel that the grandfather killed himself because he felt guilty his entire life. He felt guilty because he survived the war and the massacre in his town when no one else did. He also felt guilty because he was Jewish, but claimed the opposite for most of his life because he was afraid and ashamed. While the war was still going on, he probably went into hiding and started a new life, but had to lie about who he was in order to protect himself. However, he got so used to this new life, that he went with the flow of the rest of the people and began hating Jews and making fun of them, like the rest of his family did.

So, after he went back to his old town, and was revisited by his past, he felt that he deserved to die, or perhaps he felt that after talking with the woman, that his life was now at peace.