In "A Good Man Is Hard to Find," why do the murders of the grandmother's family member take place "off-stage," out in the woods? Could it be argued that this heightens the effect of the violence?

The murders take place offstage because the focus of the story is meant to be on the grandmother. The point of view shifts so that we are experiencing the scene through her senses. She is stuck in a ditch and does not herself witness the executions.
Therefore, like her, as if we were her, we simply see the family members being taken off to the woods and hear what the grandmother hears, including the gunshots in the distance that indicate they've been killed. Throughout all of this, the grandmother is frightened, dazed, and disoriented, and we absorb what is happening in the same surreal way.
Having the murders happen offstage also gives us a moment of hope that maybe we are misunderstanding, that maybe everything will somehow turn out OK. This does heighten the effect of the violence in the sense that we have to process what is happening—and, like the grandmother, experience the sickening acceptance that these innocent people really have all been killed. On the other hand, O'Connor no doubt had an artist's sensibility that watching the murder of two children and a baby, as well as their parents, would be too graphic for most readers to bear. Her main point is to keep the focus honed on the grandmother and her moment of grace amid the horror.