Sorry, I hate to disagree here but I think that nem is definitely on the way out. It looks clearly to be deteriorating. If it's turning your water colors, it needs to be gotten out. If you pull it out of the water, you will likely smell "the smell", it's a smell like no other and one you will likely not ever forget. If it was mine, I would pull it immediately, it's just not worth the risk of of it rotting in your tank. Dead nems can be nasty and at the point they are totally coming apart, it's next to impossible to get all of the tissue out and you will be stuck doing massive water changes and putting the other critters in your tank at risk.