I have no suggestions as to what it might be, but I do have a tip for putting something on it. My daugher gets very crusty, dry areas around her mouth, and will always wipe off anything I put on them, so I put it on while she is sleeping. Sometimes she still reaches up a hand to rub it off, but if I gently hold her hand away, she quickly forgets about it and goes back to deeper sleep. I use A&D ointment or Neosporin/Bacitracin.
Good luck with figuring it out!