You can't use the stuff the bugs chewed up, but you can remove that wood and use sound wood beneath it.
I would cut it in half first with the bandsaw. Once it's cut, inspect the inside and see if the bugs bored down into the wood. You will see little holes where they traveled around inside the log. If there was no boring going on, then you could potentially remove the outermost ring or two to get below the bug damage and the make the bow.
My only concern then would be, how long did the log lay around whole, with the bark still on. Generally, if a white wood like hickory laid around long enough to be affected by bugs, I'd be concerned that it also laid around long enough for the wood to degrade inside too. It may not even be visible, but it may have lost much of its resilience/springiness, making it virtually worthless for selfbows.
If you haven't already, ask your buddy when it was cut and how it was stored since then.
Are there any drying checks in it?