Dynamic variables not working for Emacs 23? grep-command issue

[bwooster47]

I am a new emacs user - and am looking for help in figuring out how to
temporarily change values assigned to defcustom variables.

In Emacs21, the following changes to the grep command worked fine, but
in Emacs 23 it does not work - the grep-command can never be changed
after it is once set.

(defun grep1 (arg)
  (interactive  "P")
  (let* ((grep-command "grep FIRSTSTRING")
         (grep-null-device ""))
    (call-interactively 'grep)))

(defun grep2 (arg)
  (interactive  "P")
  (let* ((grep-command "grep SECONDSTRING")
         (grep-null-device ""))
    (call-interactively 'grep)))

In Emacs21:
M-x grep1              shows FIRSTSTRING
M-x grep2              shows SECONDSTRING
In Emacs23:
M-x grep1              shows FIRSTSTRING
M-x grep2              shows FIRSTSTRING

I'm having same issues with the "default-directory" variable, it never
allows other values after it is first set, etc, so there must be
something basic that changed in Emacs23 that I'm missing - any help
appreciated!