I refinished a stock for a friend a while back, and the wood looked much like that. I couldn't sand off the discolorations, unless maybe if I took a lot more wood off, which I didn't want to do. But, why the need to get rid of that discoloration? That isn't Walnut. It's just a plain inexpensive wood that Marlin put a covering finish on. Now you've taken that beat up covering finish off. You aren't likely to make that wood look really good as it is, so I recommend that you put another covering finish on it. That will actually hide the wood and if done well, can have the look of a good walnut. If you want to go that way, I'd suggest that you sand it to 320 grit (150 grit, then 220 grit, then 320 grit and then raise the grain a few times, like you did). Then I'd spray on a couple of light coats of Zinsser dewaxed shellac (spray cans available at Home Depot or Lowe's) being careful to not let it run, let dry and then sand very lightly with 320 or 400 grit. Then you can wipe on a Walnut colored gel stain varnish. The Hickory gel stain varnish that I have looks pretty good also. Use a bunched up rag to wipe on the stain/varnish and once you get the hang of it, it'll look just like wood grain. If you put some on and don't like the look, just wipe it off with a rag and Mineral Spirits and try again. Once you've got it looking good and looking like it's a walnut gunstock, you can put on a couple of coats of Minwax Spray Fast Drying Polyurethane (sand lightly between coats) and don't sand the final coat. Then, once good and dry (a few days) rub the Polyurethane finish with OOOO steel wool and paste wax.
When I finished the stock that I did for my buddy's old single shot 22 rifle, he thought that it was a good walnut stock. I'll admit that it took me a while to get the hang of how best to wipe on the gel stain/varnish. I had tried about half a dozen other ways to make that cheap wood look good and I failed miserably each time. That's when I decided that the finish would have to actually hide the wood and be a 'fake' finish. Now if you don't want to work that hard, and if you don't care if the wood looks like well finished walnut, just brush on some Minwax Walnut or Special Walnut or Hickory oil based stain and spray the poly on after that. Won't look as good, but it's your call as to what you want. If you do it the easy way, the stain is likely to blotch and look really bad. That's what happened to me and why I finally decided to take the longer approach and hide the wood. I had promised the guy a nice looking stock rework and that's what it finally took. I probably put $100 worth of manhours into a stock for a gun that was probably worth $25.