probably best to take cuttings from the top part. not sure if there's anything to stop the rot that is already spreading.

I was afraid that you would say that.

The rot seems to be contained to one-side of the trunk at this time...it has not taken the entire trunk. So, half the trunk is 'soft'...the other-side is normal.

Is there anyway to cut out the rot and the plant will survive or just impossible?

Also, the root ball of this Plumeria is involved with another healthy Plumeria. They are planted in the same spot.

How far do I dig down to remove the rotted stem, if this is indeed the best solution forward to save this plummie?

thanks!

dump them out of the pot and gently seperate them. Then do surgery on the wounded tree removing all the dead tissue. You can dust it with cinammon if you want, it has some anti-fungal properties. Repot the tree. Put it in a warm spot protected from full sun. You can take some cuttings while you are at it, then if the tree dies you still have them. I`ve had this happen to a plumeria in the past, it did great, growing like crazy and blooming until it drowned in hurricane Ike. It had the strangest looking trunk, like you say, it was only 1/2 of a trunk.
Tally HO!