Not sure about his breed, other than he's a real cutie pie! But I did find this thread discussing some of the same issues:
1.5 Year Old With Chronic Skin Rash Since Being A Puppy
If you google "seborrheic dermatitis in dogs" there's some information there on something that sounds very similar.
Also, has your friend had him seen by a veterinary dermatologist? Specialists can be worth their weight in gold when it comes to tricky cases. Might be worth the extra cost
I hope they find some answers soon and the little darling gets some relief