Actually, 'Heifer 2' is no more likely than 'Heifer 1' to have inherited a genetic defect from Bull 1, if he's carrying one, so undesirable recessives are no more likely to show up in that sire/granddaughter mating than in the sire/daughter mating.
Agree, the inbreeding coefficient is getting higher with every cross... and at some point, ol' Bull #1's fertility is gonna tank (usually by 7 years of age, most bulls are experiencing a decline in fertility - if they're still working by that age), so he may or may not even be around to breed many of his granddaughters.
That said, we kept a recent bull around 'til age 10... pretty much only did cleanup behind AI for the last 6-7 years he was here. Turned out that he was the founder of an Angus genetic defect, and did sire some defective calves - out of both daughters and granddaughters. However, there were other granddaughters that he caught on the cleanup cycle that delivered fine, normal, healthy calves.