Inbred kids seem to turn out fine according to this movie...

Some kids who have been fathered by their own grandfathers do inherit some psychological defects or certain physical deformities. Others turn out somewhat normal, although this is extremely rare, and perhaps only in fictional screenplays.

Serial killer Ted Bundy was probably fathered by his maternal grandfather because people close to the family insisted that his mother lived with her father well into her twenties and was never married. They finally talked to Vanity Fair several years after he was executed in 1989. The alleged father/grandfather was a widower who kept his daughter in the house all the time and wouldn't let her date or go to College. The Bundy family always said that Ted was an out-of-wedlock child fathered by a high school boyfriend when his mum was in her late teens, but no one was certain if this was true and doubted it, since no one remembered her ever having had a serious or long term sweetheart. Other neighbors were suspicious that Ted's mother was an incest victim, and never bought this nonsense. Ted's behavior from the very beginning was extremely abnormal and bordered on the very violent to say the least. It was suspected (but never proven) that he killed an eight-year-old girl when he was just fifteen-years-old. And he would torture pets, both his and those of other neighbors, another clue that he was just not right upstairs.

But back to Chinatown: apparently Katherine Mulwray is normal, albeit incredibly delicate and shy. But she seems to possess childlike qualities. She appears too vulnerable and fragile, although the hysteria she shows at the end might also have been that of any young woman who had just seen their mother shot to death. It's hard to believe that this fey child/woman matures into the worldly Kitty Berman in The Two Jakes. I wonder if the sequel would have been better received if the actress who appeared in the 1974 film had also starred in the remake.