John, I dunno what it is. Looks fungal though, I'll bet the bugs are secondary. Maybe an infected mechanical injury or ? When you say duff are you talking about frass(sawdustlike bug poop), or rotten wood? Any shrooms or conks nearby? Have you tapped it with a rubber mallet, or tried digging out the decay to determine how hollow it is? Dead or thinning branches in the upper canopy? Butt swell? I've done a few trees lately that looked similar on the outside, but only had a couple inches of holding wood. A couple maples with Ganoderma and a Doug-fir with Phaeolus shwienitzii. Your extension agent might be able to help, or pass a sample and pics up the line.
