When Palythoa close up, they do often appear lighter, and you do see the polyp set deep into the coenenchyme. That is not the case here though.
Im not sure of the exact cause of that particular disease- Ive had it come in a few times (including a colony a few weeks ago. argh). Unfortunately, it spreads through a colony very quickly, and usually kills off most of the polyps. Ive had some success using a syringe to spray down the polyps with hydrogen peroxide (OUTSIDE the tank... duh), then rinsing in clean saltwater. It does not always work, but Ive had a number of colonies clean up with that method, as have a few friends of mine who have also tried this. No guarantee that itll work for you, but its worth a shot since theres a really good chance you are going to lose the group anyhow.
Ive heard reports that this condition is made worse by exposing the zoas to high light and low flow- you may want to try moving them to another part of the tank where they are getting a better current. As Frick mentioned though, you should at least siphon off the white stuff so that it doesnt spread around the tank. Good luck!
