I can't speak in regards to the cotton-like substance, but in regards to the fungus, not all fungi are bad. In fact, many plants will form a symbiotic relationship with them via their roots, benefiting both in the process. I was outside watering my plants and noticed a couple interesting looking yellow mushrooms had sprouted out from one of my larger pots. I just snapped a couple photos and then just let them be. Your plant looks like it's doing okay. Tho, judging from your photos, the soil itself looks like it's being kept too dry. Under watering can be just as harmful as over watering.

Looks very much like Virginia Creeper. If it is, you may notice that older growth has a way of clinging to surfaces. Don't know if it's a tendril, a root, or something else. It grows out from the stem, very thin, and terminates in little flattened "pads" that grip wood or concrete block. (I've seen it there. Probably grips other surfaces too.)

Thanks! The plant in the picture is a very small one, probably planted where it shouldn't have been, and was removed after the photo was taken. I am new to the property (moved here last Aug.) Most of the other dogwoods - 7 full sized trees, and many of the azaleas - a dozen or so, are showing these signs to a much lesser degree. I think the grass is centipede - its one of those very stout, creeping grasses that excels in our sandy soil - though I know its not Zoysia. It does grow right up to the trunk of all the dogwoods, but not many of the azaleas which are just beyond the woodline and in 'natural areas'. I can't see any difference in the amount of damage/lichen between the plants in the grass and those in the woods. The affected plants are spread out all over the 2+ acre yard - some in full sun, some in partial shade, and across varying moisture conditions. Here in Eastern NC, we did have a hot dry summer last year, and I doubt that any attention was given to these before August. Drainage here is excellent, and doesn't seem to have a bearing on which plants are being affected. I'm not sure about the planting because they've been here at least 10 yrs or more, judging from the rest of the landscaping, probably about 20-25yrs. Thanks again for the input and any ideas!

since you duplicated the post.. i will not knock down the one with the picture.. but i can not focus on the picture at all ... its in focus.. i just cant see what the arrow points at ... any chance at a bigger pic?? ken