Your experience with doctors must be frustrating.  Many of
the parents on this list have written of similar
experiences.

I would guess that your son has a milk allergy because of
his symptoms (extreme nasal stuffiness, rash).  It sounds
like his body can handle a little milk because of some of
the things he can eat.  I would be a little worried that if
you keep exposing him to these small amounts of milk he may
become increasingly allergic (perhaps you could check that
with a allergist doctor).

I make pancakes with oil and soya milk and they are quite
tasty - well except on last week's camping trip when I
forgot the baking powder!  Separating the eggs and adding
the beaten egg whites last makes a fluffier pancake.

There is dairy free margarine, crackers and a few brands of
dairy free cookies.  There are a few dairy free, casein free
cheeses for making pizza.  There is frozen tofu and rice
milk for ice cream. I know it can be more work though.

If he is cranky or fussy a lot it might be especially
worthwhile going totally dairy free to see if that helps.

Best of luck.
Nancy