This a bug on the NPCs, cause last I knew if you attempted to butcher/skin an undead it said the corpse was rotten. Wasn't for sure if this was meant to happen this way so instead of filling the bug command in game up I figured I'd post it here.
Code:
( 2) A scrumptious looking steak is here.
A rotted undead halfling lurches here.
[HP: 100%] [ME: 100%] [PE: 81%] [Wealth: zero]
eat steak
You eat a steak of an undead halfling.
You are no longer hungry.
[HP: 100%] [ME: 100%] [PE: 81%] [Wealth: zero]
eat steak
You eat a steak of an undead halfling.
Notice you can even butcher the zombie corpses.