OH MY GOODNESS!
I suffered like this as a little girl. Exact same symptoms - almost a wet redness about 1/2 inch around my mouth - I looked like a clown, a very unhappy one at that. Your poor little mite! It was really agonising - water on it was so painfull, I licked my lips all the time, and hid my face.
My parents were both Doctors and my mouth was treated with all sorts rubbish for years - to find out myself that.......
The ONLY thing that healed it (and altogether) was LIPSALVE, used all over the redness. I always have one about me, (even still and it cured me so many years ago) I used Lypsyl, its very gentle and waxy - its the layer of heavy wax that soothes immediately and makes it go away (vaseline NOT good), apply such a chapstick as often as you can to begin with.
I know it sounds almost too simple to be true (can't believe my parents never tried it!) but I think it will stop altogether with a lipsalve - I'll bet my best hat on it!
Please do let me know how you get on, or email me anyway as I can share my own experience and knowledge with this complaint: