Your 3yo certainly has concerning symptoms. I hope that amongst the doctors that he has seen are included a pediatric infectious disease specialist. In my experience, onset of pain and lack of use of an arm is frequently caused by a “nursemaids elbow” (a dislocation of the radial head in the elbow joint). This however is never associated with the rash you are describing. This painful rash of tiny blisters that you describe may be ‘‘shingles” or Herpes Zoster. This is caused by the same virus that causes chickenpox. Rarely this can occur in young children.
LJGMD