It's not cradle cap - if it's red as you describe, and he has eczema elsewhere, I'd say that's what it is.
The steroids are improving it, but not curing it - so you need to try and work out the cause, steroids are great used appropriately(and short term) but I think this Dr is not really thinking about the long term issues....... can you see another Dr?
It could be allergic, for example set of by perfumes/chemicals in soap, shampoo and washing powder...... 2 of my 4 DS and my DH are like this, including my 16mo.
If you replace all of your usual products with "better" (for the skin), ones, you should see a marked improvement within 7-10 days, if the condition is caused by sensitivity to perfumes/preservatives etc.
Here what I use, just as a guide - clothes washing - only use non-bio, and NO fabric conditioner.
Bath/washing/skin - the "little me" organic skin care range, Tesco/boots sell it, they have bath milk, baby skin/hair wash and a fab moisturiser. ANY organic stuff would do (it saves reading the labels for nasty ingredients as things like parabens etc are no allowed in organic stuff). "natural" on a toiletries bottle means nothing, don't be fooled (many of the big brands are full of skin irritant stuff and seem to think printing Natural on the bottle makes it ok)!
Nappy wipes - I use the Tesco sensitive ones (pampers sensitives bother his skin). steer clear of value wipes (compare the ingredient labels between value and normal ones and you will see why!).
Hope that helps!