C.S.
I totally understand where you're at. I went through a similar situation with my now 4 year old. It started at 18 months though. She's been diagnosed with RAD (asthma caused by respiratory infections).
The nebulizer steroids are not the same as prednisone. They won't be habit forming. The only side effects that I have found through research is a possibility of not growing as quickly.
My guess is the ped is concerned that there is an underlying inflamation causing these reoccurances. The nebulizer steroids will take down this inflamation that causes the breathing difficulties.
I'm also guessing that they think that your child has a chronic condition such as asthma or RAD.
I have had really good results with Dr. Chung at Children's Memorial Hospital.
We too really really don't like using a lot of medications for fear of all that awful stuff in such a little body. We found that we have actually been able to cut down on the really scary meds if we up some of these steroids (pulmicort) a little. She's done really well on this and stayed out of the hospital for almost a year now.
She's also very supportive and encouraging of complimntary medicine. We do chinese herbs with an accupuncturist and she does homeopathics with us too.
Good luck. I know how scary and awful this is.