The grayish part alarms me. Please do a search on BXO
(Balanitis Xerotica Obliterans), and if you can, search for images, to see if this resembles what you are describing.
While rare, it is serious, and requires medical attention. It can be treated with steroids. There is a female version, called LSA (Lichen Sclerosus et Atrophicus).
Best of luck to the two of you with this.