How does the grey stuff feel under a spokeshave or draw knife?
If it's waxy/cheesy then it's ok, if its limp,chalky or dry feeling cut it all off and back the heart wood.
Listen to the little voice in your head or gut that knows... don't talk yourself into using bad wood. I've regretted it before now.
A little discolouration can be ok, but I think feel tells you what you need to know.
Del