Thanks for posting your query at healthcaremagic.com and giving us this opportunity to clarify your doubts.
Well, most of the children have some or the other problem when they are on their toilet training programme. So, first of all, you need not worry. Well, about the rash
and the itch, it is very important that you get it treated. Take him to your pediatrician
and let him see the rash and he might then advise you a mild potent steroid
containing preparation if there is no infection at the potty region. I am sure the rash will completely heal with that ointment.
Your next problem will automatically get solved once this rash problem is solved. Your son will be then more comfortable in doing potty and you can train him to do potty every morning after telling you and he will not try to withhold it as he might be doing it now for the fear of pain.
Hope I have been sucessful in clarifying your doubts and i will be available for any further assistance. Take care and stay healthy.