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Have you put them through Breeding Advice? If they passed then I wouldn't throw them away as a breeder. I would put the mare in a pasture and forget about her - let her get the maximum boost from the pasture and then breed her to G3 A papered stallions and you should get some Blue babies. I expect Blue by G3, but if I get a Red with the genes I want, I'll just make sure they're always in the pasture - no exceptions.

For example I did the same thing with this G4 mare (Red papered);

IV Mirage Queen

Bred her to this A papered 4 stallion:

IV Exclusively Mine

Got this Blue G5 filly:

V Queen of Mine


As for the stallion, personally I would snip him. There are so many stallions available to breed to, and a big range of stud fees/ colours to choose from in the public search, if you don't have any yourself.
Mares are more expensive to publicly breed from, so I always hang on to my mares unless they fail SBA, and if they're not the paper level I want, I'll just stick them in the pasture and forget about them for a while!

I haven't always been as strict with my mares as with my stallions, because it was always easier to approximate the breeding ability of stallions until Ammit recently reworked the testing system. I have never kept a C papered 2nd gen colt intact.

As for mares, I would compare the Average Foal PT (found by adding the PT scores of a mare's foals together then dividing by the number of foals). If a mare's AFPT wasn't greater than that of her dam's by at least 4 tenths of a point, she would be snipped.

Now that we can paper mares at birth and all horses are compared with both parents for breeding ability, I will have to develop new criteria.