I suggest that you take this question to the Bonsai Forum, where (hopefully) someone will tell you how to properly prepare a plant for the bonsai experience. I suspect that the process is different than you think.

I'm afraid I don't know what the problem with your azalea might be, but I STRONGLY suggest that you select a plant that appears to be perfectly healthy for your bonsai process. Plants can adapt to it very well, but it is not for the faint of heart...if you know what I mean. You can't be fighting disease or insect pests and still be hoping your plant will thrive the rigors of bonsai life.

This plant may be able to be treated, and then live a relatively healthy life in your garden.

Are you sure your azalea is 'Coral Bells,' a Kurume? The leaves in the photograph look a little too large and reticulated for a Kurume azalea. They look more like Encore azalea leaves to me.