He declares
Legal
Can I still use Morias effect?

If so do and the defender is removed from combat, does Lord Greyson ready?

Where does Lord Greyson ready in his card text? Are you talking about Donna Calister? I thought you couldn't power in reaction to damage done, and if you do it in response to defense declaration, I believe the combat contract isn't sealed?

You could use Moira's effect in that situation. (So I believe.)

But to answer your last question, if the defender is removed from combat, the attacker does not ready.

You can only use her power before the damage step. Damage does not stack, so if you make it to the damage step, she will take lethal damage and be automatically removed from play.

Well yeah...the attack step is broken down like so:

Propose
Attack
Defend
Damage
Conclude

He declares an attack, I say it's legal, he exhausts Lord Greyson, then I respond with Moira Darkheart's effect (all this before the damage step but after proposal), the question is, will Moira be destroyed or will her effect go off?

If it DOES go off (meaning she would be removed from combat), will Lord Greyson ready?

Yes sir.

As soon as you declare an attack, that ally is exhausted.

I may be wrong, but I am 95% confident. I'd say re-check the rulebook.

I have, nothing is stated about defender being removed from combat.

No, Lord Greyson would not ready. He's already been exhausted by that point.

Edit: In the glossary.
Remove from Combat: If an attacker or defender is removed from combat, it is no longer considered an attacker or defender. The combat will conclude as normal, but no combat damage will be dealt. If the defender is removed from combat, the attacker remains exhausted. If a hero or ally exhausts to protect and then the attacker is removed from combat, the hero or ally that protected remains exhausted.

Ah thanks, I didn't think that would be in the glossary.

As I said, if you make it to the damage step, she will be destroyed. If you use her power BEFORE the damage step, her effect will resolve normally.

And as others have said, no he will not ready. I think in VS they do ready in this situation which may be causing some confusion among players.

No this is incorrect.

It is proprose and then both players pass priority for effects.

THEN EXHAUST.

If you exhaused as soon as you declared an attack then exhaust target ally cards would be far worse.