Not sure what it is, but hope you can plant out soon. Light spray with a fungicide couldn't hurt.

The area on the stem above the soil doesn't look good but I would plant it as soon as you can and deeply so the stem can form roots. I've planted worse looking seedlings and they grew just fine. I don't know what is going on with the leaves but mine get something like that from time to time. Are there enough leaves so you can remove the worse ones? If so remove the most infected. Plant soon and keep an eye on it... How often are you watering that plant?

thanks for the advice, I'm going to remove the bad leaves and quarantine/monitor its condition to see if it gets better.

It could be something else, but I've seen Pythium cause similar stem issues. If you can add more light and ventilation in the future, it might help prevent it. If it is Pythium it might not be much of a problem after transplanting, depending on how much of a problem Pythium is outdoors in your area.

If it's not Pythium, it might be something bacterial.

Pythium is my guess too. And this type of Pythium, in my experience, will get worse, to the point of killing the plant.

Hey guys, it was most likely Botrytis Stem Canker. I got rid of all my plants with rusty stems like the ones above. I have learned that you don't add compost/worm casings to your seedling mix. Especially if you are growing in your cool basement with bad circulation. My seedlings will not be getting compost/casings until they go outside from now on!