Sorry to read that, Koz. A friend of mine had an absolutely BEAUTIFUL, full bred dog (just can't think of the breed... they're almost always a reddish light brown color, mid sized dog that I believe it's good for hunting. Fairly long hair and plenty of it hung straight down from it's tail.). Very friendly dog too.
It started pulling/biting the fur on one of it's hind leg's; really tearing it up. He hoped it was insects or something, but it wasn't. It was some kind of disease and the treatment was pretty expensive. Vet said he'd have to bring the dog in at least once every 2 weeks and they treated it with some expensive salve or ointment and it would stop bothering the dog for a week or so. Like your dog - it would be a lifelong problem.
He wound up putting the dog down.. What a shame.
Hope things pick up for you. Guess I'll stand in forya and post stuff today.