The Hamiltonian in the simulation of Grover Search is given as, $H=|x\rangle\langle x|+|\psi\rangle\langle\psi|$. It is said that in order to simulate $H$ we can simulate the Hamiltonians $H_1=|x\rangle\langle x|$ and $H_2=|\psi\rangle\langle\psi|$ for short time increments $\Delta t$. In Page 258, Quantum Computation and Quantum Information by Nielsen and Chuang, the following circuits which implement the operations $\exp(-i|x\rangle\langle x|\Delta t)$ and $\exp(-i|\psi\rangle\langle \psi|\Delta t)$ are given :
Thanks @MonteNero for the fix, so my understanding is that,
$$ (|x\rangle\langle x|)^{2m}=|x\rangle\langle x|=(|x\rangle\langle x|)^{2m+1}\\ e^{-i|x\rangle\langle x|\Delta t}=\sum_{k=0}^\infty\frac{1}{k!}(-i\Delta t)^k(|x\rangle\langle x|)^k\\ =\sum_{m=0}^\infty\frac{1}{(2m)!}(-i\Delta t)^{2m}(|x\rangle\langle x|)^{2m}+\sum_{m=0}^\infty\frac{1}{(2m+1)!}(-i\Delta t)^{2m+1}(|x\rangle\langle x|)^{2m+1}\\ $$ $$ =I+\sum_{m=1}^\infty\frac{(-i)^{2m}}{(2m)!}(\Delta t)^{2m}.|x\rangle\langle x|-\sum_{m=0}^\infty\frac{i(-i)^{2m}}{(2m+1)!}(\Delta t)^{2m+1}.|x\rangle\langle x|\\ =I+|x\rangle\langle x|(\sum_{m=1}^\infty\frac{(-i)^{2m}}{(2m)!}(\Delta t)^{2m}+1-1)-|x\rangle\langle x|\sum_{m=0}^\infty\frac{i(-i)^{2m}}{(2m+1)!}(\Delta t)^{2m+1}\\ =I-|x\rangle\langle x|+|x\rangle\langle x|\bigg(\sum_{m=0}^\infty\frac{(-1)^m}{(2m)!}(\Delta t)^{2m}-i\sum_{m=0}^\infty\frac{(-1)^m}{(2m+1)!}(\Delta t)^{2m+1}\bigg)\\ =I+|x\rangle\langle x|\Big(\cos(\Delta t)-i\sin(\Delta t)-1\Big)=I+(e^{-i\Delta t}-1)|x\rangle\langle x| $$ $$ \implies e^{-i|x\rangle\langle x|\Delta t}|x\rangle=(I+(e^{-i\Delta t}-1)|x\rangle\langle x|)|x\rangle=e^{-i\Delta t}|x\rangle $$
What oracle does is it flips $|0\rangle\to|1\rangle$ if the input is $|x\rangle$, then
$\begin{bmatrix}1&0\\0&e^{i\Delta t}\end{bmatrix}|1\rangle=\begin{bmatrix}1&0\\0&e^{i\Delta t}\end{bmatrix}\begin{bmatrix}0\\1\end{bmatrix}=e^{i\Delta t}\begin{bmatrix}0\\1\end{bmatrix}=e^{i\Delta t}|1\rangle$
This look like the phase gate should be $\begin{bmatrix}1&0\\0&\color{red}{e^{-i\Delta t}}\end{bmatrix}$ ? Or am I missing something ?