I'm not sure if he technically had more power and knowledge than Grayskull, but I personally see it that he has a different type. He knows of different magics and whatnot. Being so old it could be considered that he knows many of the powers of Ancient Enternia that have been forgotten over the centuries.
That's why I consider why he could save Man-At-Arms when the Sorceress could not - he knew of a different sort of magic to save him.
If Granamyr turned evil, could he be defeated... good question. I think he'd certainly wipe out a lot around him even if he was stopped. I like to think that Granamyr is so wise that his sheer logic tells him that it is not in his interest to turn evil (sorry, that sounded rather a cop out answer didn't it!! )