I was in a very similar situation when I applied foir an undergrad scholarship. This letter needed more help than even I wanted to give it, but it was structured pretty well and VERY complimentary. This guy was a former teacher and friend I kept in touch with.
I sat down, scanned it into my computer (I got a hardcopy), and got pink highlighter and circle happy. Sent it back to him, with an apology for being such an anal person (I blamed it on being a yearbook editor and my advisor!) and left it at that. He sent me back a letter 2 weeks later fixed. He never lead on that he was offended
I wouldn't hesitate to have him fix the gramatical/spelling errors--just DON'T mess with the "meat" of it!! You don't want to have him feel like his letter wasn't good enough about you--you chose him for good reason to write a good letter, and he did well minus those small little errors.
I'd definately give the man his props and a MILLION thanks... if you don't feel comfy saying you found errors, say you gave it to an pbjective third party (wife, parents, English major sister, whomever) to read, and this is what they said.
I wouldn't be offended whatsoever, just happy that someone could find these errors--not sending in a clean letter would not only make me feel bad for not catching it but also sending in unclean material can reflect kind of poorly on the recomenders part (words of an English teacher of mine, not my own words).
-Liz