If a Grounded character is walk up to a giant character does the grouned character need to stop 2 squares away and on the next turn move up the final square? or can they walk directly up to steel?

They become adjacent when they become 2 squares away... they would have to stop.

would the none Flying character then hsve to roll break away to move closer?

Yep.

(Breakaway roll is needed any time a character begins the turn adjacent -- which is 2 squares when adjacent to a giant character -- and wants to move. Even if the character wants to move closer.)