K.C.
J.,
It sounds like eczema, it won't scar, it will most likely disappear by the time he is 2.
Meanwhile, the cetaphil is an option. Stop using soaps, just pat the skin dry. Keep it moist with lotion after you clear it up with ointments.
RE: laundry. You might want to launder your bras, shirts,his clothes, bibs and sheets and anything that comes in contact with his face in something really mild, like Ivory Snow. Then in the last rinse put 1/2-1 cup of white vinegar. Do not rinse it out. Make these changes one at a time and you will know what helped.
It is hard to see what looks like an angry rash appear on a little one's face, but it doesn't seem to bother them at all.
K.