The oil supplement is a good idea. Fish oil in general should be OK, but stay away from Salmon. (Mercury poisoning is rampant.) You can use other oils also like flax seed or sesame for variety. Raw egg is another option along with this.

First off though is a trip to the vet to make sure they don't have mange. (The itching can start long before any hair loss, redness, etc.)

I'd had no complaints from the dogs using Corn Huskers lotion as an after bath rinse to temporarily alleviate dry skin. (Since i do double sudsing to make sure i strip their oils.) I do about 1/4 - 1/3 7oz bottle diluted into about 20 - 30 oz of water. After i get done THROUGHLY rinsing the dog of any soap, i then slowly pour over the diluted lotion mixture (cupping my hand as need be so that it goes towards the skin instead of just running off the hair.) I then make the dog wait about five minutes before shaking off (and then toweling.)

If they have something like mange than lotion isn't going to help matters any, but make it worse.

Good luck to poochies!