Fekin

Any areas of the wall that are crumbling away need to be taken back until it's solid, and no loose material left.
Try a wire brush on the loose area and get rid of it first.

If it's only 2ft x 2ft then once it's sanded down theres a few rapid set renders that can be applied to the area to fill any deep areas of it, but don't use tubbed adhesive to fill it if it's past 4mm depth anywhere, oh and polly filla works wonders too, but remember it does shrink in, so a couple of applications might be needed, then allow to dry and tile over that.