In the back of my parents yard (I am their voluntold landscaper in return for a nice pumpkin patch every year) there is a row of useless hedges that are sick because they planted only one type and far too close. Several of these hedges are dead or dying due to a fungal infection. The problem does not seem to be affecting nearby fruit trees or the grapes, or anything else. In the back I was going to put in a regular raise bed because I lack the woody material for a hugel. So my hamster wheel started turning, what if I use the dead/sick stuff, infect it with some good fungi, and bury it. Is this a good idea or is the hamster asleep at the wheel?

Some brush is better then others......once it is half rotten almost all organic matter is good! Also quite often landscaping companies will drop off woodchip for free if it is convenient for them!

I wouldn't worry about infecting it with good fungi if it already has a fungal infection as the infection that already has hold in the wood will most likely win. Assuming the surrounding plants are not susceptible to said fungal disease your plan should work fine. I would coppice (cut at the base) theses hedges and plant a more diverse hedge in between them. If they grow back use them as mulch for your new preferred hedge....like blueberries,elderberries, and black locust.

I would second Amy's advice on this one. Use what you have and don't get too fancy. Even if you don't have other shrubs to put in there now, still cut them and use them for the raised bed.