How to emulate this grayscale basemap look+feel in Google Maps

I don't know whether this will help at all, or whether Google maps supports other tile layers, but the there is an open source project (and some freely accessable tile servers) for generating base maps.

http://acetate.geoiq.com/tiles/terrain/preview.html looks pretty close to what you are after (although not quite as nice).

You could roll your own using the source as well as an additional option. Check out GitHub for all the info (including the url structure for the tile servers and the pre-rolled examples).

If you're comfortable using OpenStreetMap data, you might want to take a look at CloudMade's map style editor; the style at http://maps.cloudmade.com/?lat=39&lng=-89&zoom=4&styleId=28983 might be a good start. You can clone that style and edit it to make it better for your needs.

I'm not sure if you can use it in Google Maps API, but you can definitely use it with OpenLayers and Leaflet.

No it is not possible--Google licenses and serves MapLink, Tele Atlas shaded relief base images for the Google Terrain MapType. At V3 of the Google API you can now style the features of the Terrain MapType, but the base image data is a mixed elevation and vegetation/snow cover renderings.

You can remove the features with a &style=feature:all|element:all|visibility:off styling of a Terrain maptype. But you can not render the base map into grayscale. And, as you've found, setting saturation only adjusts the features not the base image.

You could replace the google.maps.MapTypeId.ROADMAP in your grayMapType code with a .TERRAIN maptype but you are stuck with the green gray shaded relief rendered base map if continuing to use a Google Maps API solution.

Here is an example of the best you could do with the Google provided shaded relief terrain map, note that the zoom values differ from the ROADMAP values you've been using.

Also, you'll note that the Development Seed folks are using image tiles based on a world DEM including bathymetric values with their Modest Maps FLash scripting. If you'd like to roll your own you can try the SRTM30plus or CleanTOPO variants. But you'll have to do more of the web server maping service backend work. And if you get that far into it you may want to study up on working with shaded reliefs.