I have had bogwood in my tank now for a couple of years, and have had no trouble at all. My water didn't go brown or anything, and it didn't seem to affect any other levels.
I understand that Malawi cichlids do not have much vegetation normally, but if you give them some, they love it!
My bogwood is planted, and my yellow labs have successfully bred many times with the fry using the plants as their main cover from other fish. In fact I'd say that they preferred this to the rocks as cover - I don't think I lost any!
Tracey