Answer: I think you may have what is termed "beech bark disease", or "beech scale Nectria canker". This is common on beeches, especially older ones. The scale insects Crypococcus fagi are attracted to rough spots on the beech's bark; they insert their stylets and begin to feed. As they reproduce, you can begin to see masses of cottony material, which is the protective coating secreted by the scale insects.
Some time later, the fugus Nectria coccinea var. faginata invades the areas formerly occupied by the scale insects.
I suggest you call your state's Department of Natural Resources, and ask for the number of your county forester. He or she may be able to pay you a visit, or recommend a reputable arborist. You need to determine the extent of infestation; these folks will have information on the latest pesticides and other treatment methods approved for your region. They should also have an idea of the rate of decline for trees in your area. It could be that there is nothing you can do for your tree--but it may take years or even decades for the disease to take its toll. That would at least give you some time to plant some replacement trees.
Good luck. It sounds like a beautiful tree.
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