It's definitely not acting as an acid, but I'm unfamiliar with Grignards reacting as bases with carbonyl compounds, except during failed reactions--like the quenching that occurs when reacting with carboxylic acid. I tried to work on this problem earlier today, but the more I worked on it, the more confused I got. The only way I can see 3-hydroxybutanal and methane resulting as the final product, is if the Grignard were to deprotonate the alcohol, which would get re-protonated when the acidic water is introduced. Another failed reaction.
But this doesn't seem likely. If the Grignard were acting as a base, I'd think it'd abstract the alpha-hydrogen and undergo a dehydration reaction before it deprotonates the alcohol. This would be the first alpha-carbon that I've encountered that gets deprotonated by a Grignard, but I was banking on the chance that the alcohol on the beta-carbon increased the alpha-carbon's acidity through induction. But still, this results in but-2-enal, which is still incorrect. My guess is that the activation energy too high for this to occur without heat.
Had the book not provided me with the answer, I would've never considered any of the above and been absolutely certain that the Grignard would act as a nucleophile and attack the carbonyl carbon. The intermediate, I would've thought, would've been an alkoxide that gets protonated by the acidic water during the second step.
If two equivalent moles of the Grignard reagent were used, I think the final product would be pentane-2,4-diol. That's assuming that my first scenario--where the alcohol is deprotonated--is the correct scenario. The first Grignard would be quenched by the alcohol. The second Grignard would come in unhindered and act as a naked nucleophile. The intermediate would have two alkoxide ions, one on carbon 2 and one on carbon 4.
That's all I could think of, and I really thought it out. It's frustrating. There's probably a really simple explanation... I just can't find it.