Hello and welcome! Your Dolly sounds a lot like my Timber. He was five when I rehomed him last year (June, 2012). He had not been abused so much as neglected in a busy household. The feather fluffing can mean different things. Timber usually does that when he is relaxed, but it can have other meanings. The toughest thing for me was putting all the body language together to understand what I was seeing.
Like Dolly, Timber would act like he wanted a scratch, but then would bite. In his case, I found that he really did want to be scratched, but couldn't bring himself to trust me initially. I started by scratching his head when he was inside the cage (carefully and with the bars between us). He was more receptive right before time to go to sleep. We've progressed to now, and he will sit on my arm, drop his beak on my stomach and let me scratch to my heart's content.
With most greys, it is a matter of giving them time to deem you trustworthy.
Feel free to ask specific questions and people here are glad to share their experiences.