Mike,
I think these logs are very suitable for timber framing. The acceptible grade depends on the end use, really. I would have all the posts be white oak and keep the red oak up under the roof and away from the weather and ground. I would also try to minimize sapwood on the posts. Other than that, waney and sappy edges don't really matter (unless there is extreme wane). If the logs are straight, you can get an acceptible 8x8 out of a 12" log.
I would use the cottonwood for roof decking (1x's) rather than framing timber.
Good luck and keep us posted,
Gabel
