You are right ,its a Diaper allergy known as Diper dermatitis. Changing the diapers might help. But you should remember skin in the diaper area should be kept as dry and as free from irritants as possible. Frequent diaper changes and the use of diapers with adsorbent gel material are useful means to prevent the diaper dermatitis. An emollient or paste may be applied as a barrier from irritants with diaper change.

For more severe form of cases like you said it has developed to erosion or ulcer like. You might need some low dose corticosteroids like say 1% Hydrocortisone applied 2-3 times daily followed by some emollient. And when lesions subside corticosteroids must be stopped. I would suggest you visit a dermatologist for more suggestions on using emollients and corticosteroids. Don’t try to buy yourself and use. It may harm your child.