As they exit the hotel, Richard asks 'who wants ice cream?' Sheryl places a crown on Richard's head, who in turn places it on Olive's head. He releases the family members, and they start to walk out of the lobby. The security guard tells them that Olive is disqualified from the competition and that they are released, under the condition that they are banned from entering beauty pageants in California again. Alternate Ending #2 had the family handcuffed at the security office at the hotel.
Basically, the filmmakers thought that it was too sappy (since it was too sunny during the scene) and so they stopped filming. You actually can't hear the dialogue, since the only audio option is for the director's commentary on this ending.
Richard talks fondly about Grandpa, and then the family toasts to his memory.
