"I have three layers of asphalt shingles over cedar shingles."
I'm actually surprised your insurance adjuster is willing to pay anything after seeing that. I'm not familiar with Michigan codes, but every state I've lived in only allows one shingle-over, and even then, it's typically asphalt over asphalt. I'm not sure about asphalt over cedar, but it doesn't sound good to me. Definitely not something I would do. The manufacturers warranty was voided on at least the last two layers as well.
Check with your local building code officials on the percentage issue, but I'd tread lightly with the insurance company. Look closely at your policy to see if there's a disclaimer governing things that were done without proper permits and below code. If there is, you might be wise to take their offer and run before they look any closer.
Sight unseen, I can't say about the decking, but I consider it suspect just because of age and all the layers nailed to it. I'd be prepared to replace it. In any case, the whole roof needs to be stripped and properly replaced.
All that said, there are several pro roofing contractors here who, I'm sure, will be along soon and probably give you some better info. Good luck!