Don't give up on your dog. He would not give up on you. It is possible that he may have atopic dermatitis, possibly even mange. Has your dog been treated with any antibiotics, cortizone or prednisone? have you had any skin tests done, any blood work?
Skin problems are usually caused by an allergic reaction to something in the environment, whether it be fleas, mold, dust, pollen, grass, food or chemicals that cause the dog to itch. It is a chain reaction. Itching in turn causes dogs to scratch. Constant and continued scratching will lead to a breakdown in the skin. This generally leads to bacterial infection (secondary infection), which can lead to skin changing to black, hair loss and skin odor. This is a chronic case at this point! Many chronic cases require antibiotic treatment anywhere from 2-6 weeks, along with topical treatment. The type of antibiotic used is extremely important. This can not be stressed enough.
Equally important in treating skin infection is to keep the SKIN CLEAN. The type of shampoo and the amount of bathing depend on the specific symptoms present. Medicated CORNSTARCH with ZINC is very effective in healing and soothing the skin. While most skin problems are allergy related, not all skin conditions are caused by allergies. This must not be overlooked. There could be an underlying thyroid condition, or the dog could have lice, sarcoptic or demodetic mange mites. You should get your vet to perform any blood tests, skin scraping or biopsies that may be required to diagnose these problems.