The spike above the keiki is being sucked dry by the keiki so it can live. No rotting is involved.
If that spike with the keiki was removed from the plant and stuck in water, as it appears, that has greatly reduced the likelihood of its survival.
I recommend getting some Kelpak (it's on sale - look in the classifieds here), mixing up a teaspoon in a quart of water and soaking the whole thing in the solution for about 30-60 minutes, then replace the water in the cup with that Kelpak solution.
If there is any chance of growing roots and surviviing, I think that's the best shot.
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