How do I disassemble my headset? How do I know if I need to replace it
Crunchy headset == bad.

I'm assuming the stem is already out of the bike.

Measure the stack height before you take it apart.

If it's a threaded headset, you will need 2 wrenches. One to loosen the locknut an the other to hold the adjustable race nut steady.  You may need a specialty headset wrench to get at the adjustable race nut since they are very narrow compared to your standard adjustable wrench.

Once you have loosened the locknut, you should be able to unscrew it by hand and unscrew the adjustable race and slide the fork out. Caution: loose bearings may start to fall out.  Since you reported a crunchy headset, just replace the bearings regardless of the shape they are in. Pay attention to the bearing sizes on the top and bottom of the fork - they may be different.  Pay attention to how many bearings are in the top and bottom (hopefully it is the right number - though not impossible to figure out later). Maybe they are in a cage which is easier to handle but not as smooth as loose bearings when the headset is properly adjusted.

Once you pull everything out, clean it all off and look for dents and divits in the headset parts where the bearings rest.  Be sure to check the crown race too (it rests on the base of the fork)

If there are no dents or divits and everything looks like balls will roll smoothly on them, then grease the cups (don't worry about too much grease right now - excess will come out when it's reassembled), insert new bearings (they'll just stick to the grease) and reassemble.  The hard part is tightening the adjustable race and lock nut so that the headset is neither too loose nor too tight.  

Tip: tighten the adjustable cup by hand until it is just snug and unscrew it 1/8 of a turn then screw on the locknut (don't forget any washers and spacers).  Use your wrenches to hold the adjustable cup in place while tightening the locknut.  

Test your work by rotating the fork as if you were turning left/right and also by pulling the tongs of the fork gently back and forth as if you slammed on the brakes.  If it's not right, loosen up and try again.  Adjust how much you hand tighten - more or less according to what is needed.

If there are dents and divits, you will want to buy a new headset.  Remember the stack height measurement?  Now you will want to get a headset with the same stack height.  Hopefully your LBS has one that fits your bike because you are also going to want to go visit them and ask how much it costs to have them remove the old and insert the new headtube races.  If you buy it from them, it will likely be free.  Also you will need them to remove the crown race and pop the new one on.  There are specialized tools for installing and removing headset and crown races.