When I acquired my DS II the tiller was mostly bare wood, with dryness cracks in some places. I sanded the gray areas back to new wood, and I used WEST system epoxy (with 207 clear hardner) to both fill the cracks, (let dry, then sand until flush with the surrounding surface) and then put a durable finish on it. I sanded it once more, then another thin coat, let it dry and a few coats of marine varnish to UV protect the epoxy finish.
I also had to do some repair to the rudder blade and head, as well as replace some of the through bolts, but that's a different story.
Click on the link below and browse through the pictures (2) until you see the transom pic
It's not a closeup shot unfortunately, but take my word, it does look good!
http://www.imagestation.com/album/?id=2227560093