The diarrhea is more then likely causing the rash. My friends kids have this problem where their rashes actually bleed. Try feeding him yogurt for the proabotics (sp)in it, it was recommended to my daughter last year when she was on heave antibiotics (which also cause diarrhea and rashes). Also, when you change his diaper don't use the wipes full of chemicals. Either rinse them, use a wash cloth with water, or (this may sound disgusting, but probably feels really good) run him under the sink to rinse. Those wipes hurt if you have an owey down there and wipes.
Lastly, if the weather stays nice, let him run around outside without a diaper for a little while. I would let my daughter in the house, but I don't know how you feel about clean up.
I hope it gets better!
C.