Is the area that is turning brown in someway being distressed by lack of sun or space? Are the others candeling when they should? When was it planted? Can you post pictures of this one as well as the others? Sometimes there is winter kill to one and not the others, it could be that. Or it could be a combination of that and wind. The soil although ammended as you say can be a factor. However I am assuming the others are doing fine in the same type of soil. Just wondering if this particular one has different light, heat, moisure exposure.

just to clarify bboys comment ... you properly dampen.. moisten .. NOT saturate it.. some new media ... and then repot it ... NEVER use dry media ... now.. as to what kind of media .... trees do not like houseplant soil ... it holds too much water because it has too much peat ... and rarely dries in between waterings ... as trees prefer .... since you have a tendency to over water... i might suggest a cactus mix ... which sheds water more efficiently.. as trees tend to like ... it might be a bit tricky.. pre-wetting a cactus mix ... i would take a day or two to do it .... sometimes its near impossible to properly wet .. a potting media.. once the plant is in it ... you might also post this in the houseplant forum.. for a slew of other ideas.. especially in regard to potting media ... many tend top prefer something called Al's gritty mix ... which frankly could become quite expensive becasue most of the recipes end up with a truck load.. lol ..... since you will need so little ... hence my cactus suggestion ... but reading some of the thousand discussions in regard to such.. will really bring you up to speed on potting media ... see link all this said.. dont forget bboy stated more light... trees are full sun creatures.. so they struggle quickly indoors... without extra light .... good luck ken Here is a link that might be useful: you wont need to read too many.. before you get the drift ....

One way to tell if your magnolia is alive or not. Just scrap the bark and see if it is still green inside the cambium, a tree's inner tissue. If it has brown or little green, chances are that its survival is minimal. However, if it green inside that is a good sign. Just replant and water accordingly. Remember people tend to overwater trees and plants. A good rule of thumb for watering a tree is 1 gallon per 1 caliper inch. Basically, if the tree is 1' around then apply just 1 gallon of water. Try this and hopefully this will get your tree going for good. Here is a link that might be useful: GardenWeb

I can't understand how anyone could look at the provided pictures and think that the tree might be stable. If it were stable, the large gap between the tree and the surrounding soil wouldn't exist. The tree is falling over. It may be a matter of hours or a matter of years, but chances are very good that it will eventually collapse. The larger it gets, the more potential damage it may do and the harder it will be to clean up. IMO, excavating the root flare is an exercise in futility, at best. The tree has obviously been there for a while, and the damage from improper planting depth (if any) has already been done. Changing the relative surface depth now will not resurrect dead roots and is unlikely to improve the tree's condition in any way. It could even be counter-productive by killing/damaging adventitious and adaptive roots and by making a sunken area around the base of the tree that would hold/funnel water. Of course the biggest reason that the procedure would be a waste, in this case, is that the tree needs to be removed anyway.