It is an urban legend that Katharine Hepburn was the first choice over Bette Davis. I have read from AFI people that Davis was the first choice all along. It makes more sense since William Wyler was the winner the year before and Davis was prominently featured during the tribute clips (Jezebel, Letter, Little Foxes). As for the Cary Grant standing offer, I have no idea, but it seems odd considering he gave a speech when he won his honorary Oscar, all Grant would have had to have done is say something like "This means a lot to me, thanks for everyone who helped me in my career", the end. Grant regularly appeared at the Oscars (unlike Hepburn, who went only once), so I would have thought he would have appreciated the AFI award. As for Henry Fonda's tribute, it was one of the best.
AFI Life Achievement Award: AFI Life Achievement Award: A Tribute to Henry Fonda
(1978)
AFI Life Achievement Award - Henry Fonda
Season 1, Episode 6
11 August 2005