Originally Posted by
robatsu
If I see a crown race in the condition below, a scoring all the way around (fork race is similar, but not as bad, cups are ok), my assumption is that it is not useable. However, this headset is sort of irreplaceable, at least not easily I think, so before I give up on it, wanted to check to see that my assumption is correct or if there is any hope at all...

I don't think this is a crown race, in that it doesn't look like it's designed for a fork crown. It looks (that straight cylindrical section toward the right in your photo) an upper fixed race, the one that gets pressed into the head tube. Plus, crown races and the fixed cups that mate with them often have divots and a lot more wear than the upper parts. I've seen this even in really high quality parts like early Campy Record and Shimano 600 wavy-nut - perfect uppers and trashed lowers.
The main wear I see is on the edge of the actual race (the actual race is the concave area), not in the middle where the balls should run. At that edge the color looks brassy. Is the base metal brass? If so I think this is a very low quality part, and it should be replaced if possible, with something that at least has ground and hardened races. I think many bearing cages are steel, rather than brass.
If you really don't want to replace it, I'd recommend going with loose balls rather than a caged bearing. I'm guessing that race edge wear is due to a bearing cage that didn't fit quite right. Loose balls will find the right place to run when the whole bearing is assembled and set. I like the idea of softer Grade 200 for this, unless someone who understands metallurgy speaks up.