I'd cut him.  All the "good blood" is really far back, 3rd generation and beyond, except for Bugs Alive.

If your horse at his age hasn't gone on and a made a real name for himself (with winnings or offspring winnings) don't breed him just because he's got a pair...this is how many people fill killer auctions everyday.

If you are going to own a stallion to breed you should have clear set breeding goals and if your horse does not fit that mold to an exact, then don't breed!  The large breeding farms have clear goals and that alone has allowed them to focus genetically on producing the types of horses we associate with them.  If you are breeding with the hopes of making one great one it's unlikely to happen.

I'd say the average person has a better chance of finding a great one than breeding it in their backyard.  Most studs I've seen in backyard settings would make really nice geldings.

In the breeding world you'll find that people like to have the "good blood" in either the first or sometimes the second generation, only if it's REALLY good.

For your studs offspring the good stuff would be 3rd and 4th generation, which really has no bearing on the progeny...they are just names on paper.  Don't get me wrong people buy names on paper...but you won't find many winners that way.  I always laugh when people say oh my horse is (insert name), only upon further questioning to find it's 4+ generations back...it don't mean a thing except to them.