Yikes!
To me it almost looks like soft tissue, i.e. muscle.
I had a Paddle-tailed newt years ago who began losing skin and flesh around his nose and mouth. I could see his mandible and other snout bones- no skin covering them despite trying to fix water quality issues and get rid of anything that could be harboring fungus/rot. The vet said there was nothing to be done since the bone couldn't live without tissue covering it and supplying blood.
I went to the market and bought liquid bandage and antibacterial neosporin. I put a very tiny layer of neosporin on his nose which he did not like and then proceed to cover the exposed area with the liquid bandage which he REALLY DIDN'T LIKE. The solution is very smelly and stings a bit. I reapplied the liquid bandage once or twice over the next few weeks. At first I couldn't tell if it was helping.
IT WORKED. The bandage sealed the bone in and protected it from further infection as well as more flesh deterioration. Flesh grew back over the exposed bones and he looked totally normal again! I have only tried this once and I cannot conclusively state that what I did was the reason he healed- but every day I was seeing more and more bone until I tried that. It was my only idea to save my newt and I would try it again if I saw the problem on another newt.
So, if it does end up being bone, you might consider that. If it is just a gaping hole in his side you might try it too. However, it may heal on its own.
I am sure other more-experienced keepers may have dealt with a missing limb and can offer insight. I jumped to your post when I saw the mention of bone because when I asked here, I don't recall anyone having seen what I was describing.
Best of luck!
![Smile :) :)](data:image/gif;base64,R0lGODlhAQABAIAAAAAAAP///yH5BAEAAAAALAAAAAABAAEAAAIBRAA7)
Let us know how it progresses!