Sounds like eczema to me too. Very common in little kids and the good news is they tend to outgrow it somewhat as they get older. The best non prescription cream right now that one of my daycare families is using is made by aveeno and is meant for dry skin from eczema. All of the aveeno products do well on sensitive skin. I use their diaper cream on my own daughter as well as several of the daycare use it. I find the body wash with the oatmeal in it is good too since that is what is often prescribed is an oatmeal bath to soothe the skin. Worth looking into the entire line and no I don't get paid by the company to say that just tried them all.