Avus, qui in horto sedet, fabulam de familia sua narrat; memoria eius adhuc clara est.

With in, Latin uses:

• ablative for location: in horto = in the garden
• accusative for motion toward: in hortum = into the garden

Here the grandfather is already sitting there, so Latin uses the ablative: horto.

This is an important Latin distinction.

In memoria eius adhuc clara est, the subject of the clause is memoria, not avus. Because suus, sua, suum normally refers to the subject of its own clause, using sua here would make the possession point back to memoria itself, not to the grandfather.

So Latin uses eius for his here: memoria eius = his memory.

Clara agrees with memoria. Since memoria is feminine singular, the adjective must also be feminine singular. So:

• memoria clara = clear memory

Even though the memory belongs to a man, the adjective agrees with memoria, not with the grandfather.

It can mean either, depending on context. Latin has one present tense form here, sedet, where English often uses either:

• he sits
• he is sitting

In this sentence, is sitting is a natural translation, but sits is not grammatically wrong.

No, Latin word order is much freer than English word order because the endings show the grammatical relationships. This sentence could be rearranged in different ways and still mean the same basic thing. However, the given order is natural and clear:

• Avus introduces the main subject
• qui in horto sedet adds extra information about him
• fabulam de familia sua narrat gives the main action
• memoria eius adhuc clara est adds a further statement about him

So the order is meaningful and stylistic, but not as rigid as in English.