Duncan ends up fighting and killing Grayson and was the oldest immortal Duncan had killed at that time.
This storyline was a foreshadowing of the 'dark quickening' two parter they did later in the series. Duncan explained to Ritchie that Darius became good after killing an ancient 'good' immortal and absorbing his Quickening. It wasn't clear to anyone if that was the cause for Darius's change, or whether he just had a genuine change of heart. Duncan was worried that killing Grayson might turn him evil if the Quickening of an ancient immortal had that sort of power. It didn't, but they did run with it later in the series. Methos figured prominently in bringing Duncan back to the light.