Mass-effect – Are squad mates capable of picking up grenades

No. Whichever Ammo power was used most recently will take precedence and erase the previously active one.

If you'd like 2 party members to benefit from squad ammo while a third uses something different, activate the Squad ammo power, then activate the individual ammo power you'd like to use.

Squadmates will not run out of ammo, however, the upgrades to ammo powers that increase capacity do carry over with the squad ammo powers. What does that mean?

It means that if you take the increased capacity upgrades for squad members that you intend to use a squad ammo power with, Shepard will benefit from it.

Additionally, upgrades that effect clip size rather than total capacity will result in your squad members reloading less often, and by extension, higher damage output.