[jeannie]

has this rotted down enough - its the leaf mould I'm not sure about?  Or will the tilling be enough to break it down further.  Any comment or help gratefully received. (Sorry 2nd photo is useless!)

[sunshineband]

It is absolutely fine to dig into the ground or lay as a mulch. If you were going to pot on seedlings into it, sieving might be helpful.

I've never used a tiller, just a fork, but others on our site do and they seem to manage to till much lumpier stuff than this looks 

[Headgardener22]

Put it on the top of the soil and run over it with the tiller. It will stir it in to the top couple of inches (or if you're lucky the top six) and give you a fine mulch.

[jeannie]

Thank you for your comments, very helpful.  I will use my hand tiller with confidence!