I see squirrles eating (or just chewing) this stuff.
My simple solution is: drench the top in some end cut sealer and put a cap on top of it. There is probably just enough wood for it to be unnoticable.
I do not think it is actually rotting, but you could take a look at the pictures and let me know what you think. I have seen some squirrels at this post with their head poked in. Not sure if they really eat this or what.