Not the Green Wire.. Don't ever cut the green wire!! ( From the movie fight club hehe)
A lot of times a installer will install extra wire into the ground which gives the system the ability for future expansion.
Other then the 2 sprinkler heads you found not working, does your yard appear to have full coverage ?
It's possible those wires went to other valves. Though I would bet those 2 sprinkler heads are apart of your other zones and are clogged up ( unless you don't have full coverage)
You asked- Do I just connect the two wires to the exisiting gray and blue wires? Do this wires you want to connect to appear to be continuing on to possibly somewhere else in your yard? Are these wires at the controller? If you have a a multimeter you can ohm out the 2 wires that you want to connect to, this will tell you if you have a solenoid connected at the end.. A normal operating range is 20-60 . Though I've seen those flo pro's as high as 150 and work just fine.