Welcome to Orchid Board Cassandra
It doesn't sound good if the leaves are brown inside. It sounds like it could be rotting, although if it split a while ago it could just be the dried up edge you are seeing.
Are you able to post pictures (see the link in my signature for help on that).
The choice of medium is a difficult one as it has a lot to do with personal preference and your environment. Personally I favour bark.
As for the spike, cut it down right near the base of the plant. As close as you can without damaging the base of the leaves.
Also take a look here. There is a lot of good information about caring for Phals in this thread.
http://www.orchidboard.com/community...ends-here.html