oh goodness, poor little bub im sorry for what you guys are going through, mama. to me, it looks like a contact dermatitis/yeast rash. especially since his nipple is affected. you can use an over the counter anti-fungal cream to treat yeast rash along with the oral meds he's taking, like lotrimin. the really ones have an anti-itch ingredient, too, hydrocortisone i think. something else i thought..in the close up, the rash looks like it has tiny papules (like tiny blisters)? that would make me wonder about scabies being a possibility.
big hugs and good luck to you, i hope you guys find an answer soon.
The first thing that came to mind when I looked at the pictures was that it looks like scabies. We went for months and months of misdiagnosis of my ds's skin 'problems'...everyone just wrote it off as eczema. We tried so many creams scrip and non. I did an elimination diet. I eliminated all chemicals from our house, etc. Nothing seemed to work. And then we finally got the diagnosis of scabies for all of us. It def. wasn't something that should have been overlooked so easily, but it was in our case by many doctors.
I'm so sorry you are dealing with this Mama. Whatever it ends up being, I hope you and your little one find relief and healing soon.