I have the same problem. I only got this discoloration after I had a circumcision when I was 25 years of age. So don't worry about it.
Yes I do get an arrection and ejaculation just fine. When erected it seems smooth. I do have an hernia and will get operated in two weeks.
are you able to get erections fine? when you do is your head hard or is it relatively soft? If its soft I would presume your not getting proper circulation and the skin is like that because its not getting the nutrients it needs.