The mud in ours was silty and slimy. I don't think it is a bad thing - if you think what the bottom of a natural pond is like, they are often very silty and slimy.
When mum redid her waterlilly, she cleaned the rhizome off then using a sharp knife, cut it into sections making sure there was a piece of growth on each section. Any long, bare, old, or iffy looking bits she used to slice off and bin. She would then repot in fresh earth, and in a couple of pots rather than one big one.
