Could your Collie have got damp under that matt on his rump?
I think mainly the knot caused irritation and he chewed on and licked himself there causing an infection. Moisture does aggravate the situation though because it allows bacteria, fungus and/or yeast to grow. We generally treat with plain old yeast infection medicine and it works.
Any dog can get a hot spot no matter how they are dried. It's usually not caused by water, it's caused by the dog chewing on itself for whatever reason and licking which causes a constant moisture and presence of bacteria, fungus and/or yeast. If a dog has allergies to something or becomes irritated for some reason they may chew or lick and a hot spot will be caused.
My point was that a properly fed diet does NOT cause huge coat issues and the appearance of neglect, which it what it sounds like happened in your situation. Just because the breeder shows dogs and has champions does NOT mean they know how to feed RAW properly; I don't personally know you or your breeder, and wouldn't know if either of you have nutritional knowledge in general. There are indeed SOME dogs that don't do well on specific diets, even RAW, and I don't think anyone implied otherwise. Any dog can have nutritional needs that can't be met by normal diets, or allergies to specific items. In GENERAL I have seen dogs do just fine on RAW diets.
As far as NATURAL foods, I have no idea what kind of "natural" food the dog was being fed, so that doesn't say anything about foods labelled as natural in general. The word natural, concerning dog foods, doesn't even have a distinct definition by the FDA, so a food labelled natural isn't necessarily nutritionally complete just because it's labelled as such, and doesn't contain specific types of ingredients just because it says natural.
Concerning the danger of raw bones, yes it is possible for a dog to choke or get a blockage if they tend to gulp, and also depends on what kind of bone they are given. Certain bones, specifically large leg bones and such, aren't always safe to give and CAN cause broken teeth. That's why it's important to completely research raw feeding and learn what parts are safe to give.
Even so, the danger of bones isn't a valid argument against raw feeding, IMO. If someone is worried about such a thing they can feed the correct ratio of GROUND bones which pose no danger of broken teeth or becoming lodged in a dog's intestines or throat.