I think the Dr. is jumping to a more serious diagnoses than the symptoms indicate. The most common diagnoses is eczema, and this sounds like what you have. Doctors will tell you not to bathe twice a day, but that seems to help me when the itching gets bad in the evening. Cremes seem to dry out after several hours, and by the evening contribute to the flakiness. A shower washes it off, then you can apply some fresh creme or ointment that will help until your morning shower.
I myself have these symptoms, as do several other posters on this site:
http://www.medhelp.org/posts/Dermatology/Dry--Very-Itchy-Scrotum/show/244816
http://www.medhelp.org/posts/Dermatology/dry-skin-down-there/show/243374
I believe eczema is what I have, although nothing topical seems to help much, and many times the different ointments/cremes I've used make the itching worse, sometimes to the point that I wash it off in the shower. I did find that Triamcinolon (Rx only) helps me more than hydrocortisone.
I've also had eczema on my body most of my life, but just in the past 2 years or so has it become a persistent problem on my genitals. It's also become a persistent problem on my hands since about 3 years ago (I'm 44 now).