Howdy, folks. First post here, been lurking and waiting for my WSM to arrive.
I've heard some folks say that wood loses its flavor as it ages, even if it is stored well and remains sound. I haven't found that to be the case, but maybe my palate isn't as sensitive.
In any case, I don't think "worms" are a problem, if the wood is sound. Much of the wood I use has boreholes from wood borers, and it works just fine.
I don't use rotten wood, but I have had good Q that was cooked over coals from some pretty punky stuff (burned to coals in a fire barrel).