I had a friend in MO who used hay pretty much exclusively. He would treat it by watering it to get the seeds to sprout then put it sprouted grass side down in the garden. He had some of the most beautiful veggies I have ever seen. I'm pretty sure your partially rotted hay will work fine as mulch/next year's soil builder. I'd use it and be grateful. Just smother the new grass growing on it. The fungi won't do anything harmful, either, except help rot the hay faster.
Susan
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