Looks like sausage. Doesn't cause her pain. Slightly seeping blood. Scabs up but she keeps scratching it off. Haven't seen any photos quite like it online.
I agree that out of an abundance of caution you remove the flea collar. A vet needs to see this though as it is not healing if it is seeping blood. The fact that she scratches it is also an indication of discomfort, even if the scratching is causing some of the blood.