No plant truly prefers being pot bound -- if they did, there would be a lot of very unhappy plants in the wild. The myth of the benefits of being root bound is based on our choice to grow plants under completely unnatural conditions. Because we enjoy having plants around, we grow them indoors (where conditions are generally as unnatural as they can get) and often out of their climate zone. Add to that, that as most of us do not have unlimited space indoors and have no desire to walk on a dirt floor, we choose to confine our charges to very limited, very "neat" growing spaces. Furthermore, most of us have been conditioned to think that a plant's roots should all remain in the pot. [How dare the ornery devils step out of line! (And some of mine, nosey buggers that they are, INSIST on trying to stick their "toes" into everyone else's pots!)] So we automatically assume the plant needs a bigger pot. Now this last assumption is not only logical but in reality not terribly faulty at all. UNFORTUNATELY, we almost invariably choose medias that are wholey inappropriate for pots of large size. As a result, the media fails to dry out enough/drain well enough to allow sufficient air to get to the roots. So the media breaks down faster and the roots die from oxygen deprivation. This is an issue with just about any type of plant, but is even more critical for plants that are adapted to grow epiphytically. The long and short of this myth then, is that no, plants don't actually like being pot bound, but, given the conditions we force upon them, by being underpotted care generally proves to be easier -- and shall I say safer? -- for us to manage. Hmmm, I ran off at the mouth much more than I intended. Sorry about that.
Paul, as Pediva mentioned, just cut the shriveled root off. If the plant is lacking for roots, I could see leaving one that "appears to be green or white growth at the tip of a root that otherwise is shrivelled up and hanging on by a thread" until the plant can grow new roots, but as long as it has some good healthy roots I'd cut a sickly root like that off.
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