I had one that started like this unfortunately it didn't make it. I think it was just a bad seed to begin with. This is how I planted mine and they were succesfully growing aerial leaves until winter and they went dormant. I now have some coin leaves starting to pop back out of the soil:) good luck.

Here is a link that might be useful: lotus seed step by step

If the water is nasty and smells bad, the first thing I would do is drain it out and add fresh water. The way I usually do it is to put the water hose in the pot wtih the nozzle at the bottom, and turn the faucet on low, so that it slowly fills up and overflows. Turn the water off when it becomes clear. It could be that the water has gone stagnant.