I would do these calculations in the opposite order:

1. find all damagable objects within the radius
2. cast a ray from the grenade to each found object, to test whether they are shielded

For more information, see this answer which discusses how to apply damage which falls off within a certain blast radius, and just add the raycast test to it, to check for cover.

function AreaDamageEnemies(location : Vector3, radius : float , damage : float )
{
    var objectsInRange : Collider[] = Physics.OverlapSphere(location, radius);
    for (var col : Collider in objectsInRange)
    {
        var enemy : Enemy = col.GetComponent(Enemy);
        if (enemy != null)
        {
            // test if enemy is exposed to blast, or behind cover:
            var hit : RaycastHit;
            var exposed = false;
            if (Physics.Raycast (location, (enemy.transform.position-location), hit)) {
                exposed = (hit.collider = enemyCollider);
            }

            if (exposed) {
                // Damage Enemy! with a linear falloff of damage amount
                var proximity : float = (location - enemy.transform.position).magnitude;
                var effect : float = 1 - (proximity / radius);
                enemy.ApplyDamage(damage * effect);
            }
        }
    }
}

If you're using rigidbodies for your enemy objects, you could also use AddExplosionForce to add a proximity based force to push them away from the explosion centre.

If you enable the Maximize on Play button in the Game window, the Game Window will expand when you hit play and get small again when you stop. The downside to this is that you can't see the inspector/hierarchy windows without opening them manually.

You are right in this aspect