I have never used Peroxide, so I can't comment on what that may do.

Hot spots take on a life of their own very rapidly. With bichons, we are constantly on the lookout and apply the Gold Bond the instant we see one start up. If you can catch it in the first few hours, you can stop it. Otherwise, it will run full course, but using the powder and then later in the process switching to the vaseline will contain it. Once they get infected, a vet visit is mandatory.

Good luck!