Yes, most are probably already dry-rotted beyond salvaging. I now feel like you do about stay away from that era. However, when were kids, playing "Army" with this surplus stuff, we actually got a kick out of some blood stained pouches and a bayonet we had. Now I am kinda freaked out by it. Especially after seeing "Band of Brothers" and "Private Ryan".
In short, it can dry-rot, continue to decay and break down in an attic or basement somewhere, or as mentioned can be put to use and thus maintained. Since the reality is these have no fiscal value, putting it on a toy watch of little value is a wash. The rest is just Karma if you are so inclined. Like Nanuq said, if this was a family members that survived this horrible time, and their old gear, put it to use.