The "u-" prefix can mean the second person singular "you", as you noted.

However, it is also the subject prefix for singular "u/n" and "m/mi" class nouns. As something is rotting, it is not very likely to be a person, so it's assumed to be an object.

Example:

Mti unaoza - The tree is rotting

Unaoza - It is rotting

See my reply to the reverse sentence.

Prefixes (and object infixes) for the main non-M/Wa noun classes (relevant class in bold) are:

U- -------M/Mi, U/N
I- --------M/Mi, N/N
Li- -------Ji/Ma
Zi- -------N/N, U/N
Ki- -------Ki/Vi
Vi- -------Ki/Vi

If you come across pa-, ku- or m- they are part of the place classes of nouns. I've still not quite gotten a grasp of those. I think pa- is for specific locations, ku- is general and m- is inside a location, but I might have mixed them up. I don't think the prefix version of these are are really covered in this course.

Strictly speaking, it can mean that, so that translation should be accepted. I don't really want to think too much, though, about a situation where you might need to use it.

Yes metaphorically it would depend on context but if you want to say "you stink", that would be "unanuka"