It sounds serious. There are several fungal diseases that affect roots, crown, and the lower stem. I wouldn't want to take a stab at which one it might be, or if indeed it IS one of those diseases, but it sounds like it probably is.

Usually remedial efforts are unsuccessful against fungal infections like the one you described. The best offence is a good defence - making sure cultural conditions don't support the disease and that they are favorable enough they allow the tree to grow with enough vitality that it can fight it, or prophylactic measures that guard against it, beyond the influence of culture.

Al

Al, thank you for responding!

Poor thing - do you think there is anything I can do for it? The mushy spot actually dropped some of its bark off, and the trunk under does not feel mushy, though the other wise, where the bark/outer layer was not dropped still does...

In addition is has dropped two more leaves, and the leaf-less branch seems to look wrinkly, though it is not mushy... all of the leaves are wilty and have not perked up at all since my friend watered it, and a few are discolored...

If this is a fungus infection will it spread to the other plants I have in the room - do I need to place it away from my other plants? Is there anything I can do to help it?

Thanks!!

-Willow

Scrape the exposed part where the trunk has deteriorated & see if the cambium is still viable.

The standard reply is inspect the roots - correct/remove anything that is rotted, pot into a durable free-draining soil, move the tree outdoors into dappled or open shade, water only as required, hope.

It's not likely to spread unless your other plants are stressed/weak.

Al

wandering willow, does the mushy band encircle the stem completely? If yes, then I would not hold out too much hope for the portion above this band. If, however, there is a small strip of 'wholesome' bark, you can carefully clean away the mushy portion and prevent the (fungus) condition from spreading. Work like a surgeon. Use an "Exacto" knife with a new blade and dip it into a fungicide solution after each contact with the plant. The exposed section of the remaining strip of connecting bark should show a thin green stripe on each side. In time, the wounded surfaces will heal over; the gap may even be closed.
If new sprouts appear below the damaged band, it might be because the upper part of the plant is truly dead and you might be better off cutting away the whole upper part and allow one or two of these new buds to give you a new plant.