I used to work for the Forest Pathology group at UC Berkely in the Department of Plant Pathology.

Blue stain is caused by a variety of fungi which accompany bark beetles. It is found in the sapwood of beetle-killed trees and by itself has no real impact on wood strength or quality.

Other fungi are also present along with blue stain in most cases, but if the trees are harvested quickly after the beetles kill them there should be no practical change in wood strength. If there is a long delay between tree death and the log being turned into boards there could be some problems.

You may have seen log decks being watered at sawmills as you drive by them. This is done to keep the moisture conditions wrong for insect attack and stain fungi growth. Wet logs won't normally be attacked by bark or ambrosia beetles and wet wood doesn't stain easily.

Sounds like you have found a good deal for making some very pretty paddles.