Be cautious with what you find on Familysearch as there are a lot of mistakes. It is a good place to start looking but be sure to back up the results with real records. I don't believe Warren and Vermillion were ever one county. They do adjoin and people moved back and forth.
I found your grandpa in Warren Co in 1860 and possibly that is where they got the idea he was born there. However, the census says Iowa!
1860STATE or TERRITORY:INCOUNTY:WarrenDIVISION:Mound TownshipREEL NO:653-305PAGE NO:213 REFERENCE:Enumerated on 9 July 1860 by E. F. Lucas
1870 United States Federal Census > Indiana > Warren > Mound enum July 27, 1870 William Nichols, 45, farm laborer, b Ohio Sarah, 39, b In Jacob M, 19, laborer, b In Charles W, 16 George W, 13 John C, 10 David G, 6 Rachel M,3 Joseph D, 7/12
I found a lot of Wm Nichols married in Vermillion Co but none to a Sarah. I did not find a marriage for any of the Nichols in Fountain Co though. Vermillion Co was formed in 1824 and Warren was formed in 1827 I hope this helps a little. I am from Danville, Illinois and many of my relatives lived in Warren Co, Parke,Vermillion and Fountain Co, Indiana.