Epsom salts (magnesium sufate) will stimulate blood circulation while iodine alone will not. Of the two, Epsom salts is more effective in restoring healthy tissue. Any antibacterial solution may be added to it to combat any bacterial infection that may be starting.
You are correct that the bandages are responsible for this sad turn of events. It's very important to unwrap the bandages two days after initial bandaging precisely for this reason, and the bandage should be changed every few days to avoid the rancid condition you've found.
It may not be too...