My daughter gets a rash on her face and upper body when her skin is really dry. I didn't know what it was at first but it started when the weather got really cold and dry. I thought she had a food allergy because her skin was red and peeling. It seems to be under control now though. I just moisturize her constantly throughout the day, every time I change her diaper or wash her face. I also use Oilatum (and occasionally epsom salts) in her bath and lots and lots of Aveeno unscented lotion after. Sometimes I rub almond oil on her also. I had keratosis pilaris when I was younger too, so she has probably just inherited my skin problems. I don't use anything scented on her at all, laundry detergent (arm and hammer), soap (aveeno unscented creamy wash - in very small amounts), lotion, and I don't shampoo her hair at all, just a tiny bit of creamy soap once in a while.
All of this seems to have helped us. I know how worrying it can be. I went through so much worry over what she ate, keeping journals and eliminating different foods. But I think she just has dry sensitive skin.
Hope you figure it out.