Cedar has natural oils that preserve it from rot, so the wood is definitely not ruined.

I think the gray looks neat. It is probably not too deep if you want to sand it off, though. Otherwise, just use the strips. Don't worry about drying them in any fancy way. No kiln needed.

At one time boats were made of unpainted wood. they spent their lives in the water, which caused the wood to swell and force shut the seams between the planks. Wet wood made dry boats.

By the time you are ready to cover the boat with glass cloth and resin the wood should have come back to a "normal" state of interior humidity, or moisture content. After covering the outside of the boat, and before coating the inside, let it sit for a few days where it can stay warm so any trapped moisture can migrate out the unsealed sides of the wood. Then follow the ideas for glassing to avoid outgassing ( start warm, towards evening, and let the boat cool as the resin hardens. This way you won't have the boat blowing air bubbles into your glass coat.

hope this help

PGJ