Hi Kit,
It's nice for you to be seeing a skin dog early on. They're that much easier to treat.
Checking the response to omega 3 fatty acids is a good first effort. If there is an excellent response and no resultant coat greasiness, we know the dog is 'blood deficient' from a Chinese point of view, and that the itch may be as much a dryness issue. If the added oil results in an oily coat, then we know the dog is more prone to Damp Heat and that overt inflammatory tendencies are just gearing up.
The tongue still suggests more of a deficiency picture. Given the early onset, food allergies are a distinct possibility. Has that been explored yet? I'd move toward a higher protein lower carb diet, which tends to treat both of the above differentials. Any soft stool tendencies? The ventral lesion distribution suggests this case will end up being a Spleen deficiency, Dampness, Damp Heat case - i.e. a food allergy case or at least a problem where the inflammation is propagated by diet.
One formula consistent with your tongue interpretation, the early stage of the disorder, and the possible role of diet is Chu Shi Wei Ling Tang (Modified Wei Ling Tang; K'an has yet another name for it). Two confirmatory traits that would make me give this first: (1) The dog enjoys warmth; and (2) the pulse is a little on the deep and maybe wiry side. If these are true and the stool has had a tendency to be soft from time to time, that's where I'd start. Its skin anti-inflammatory traits are mild but significant over time and its GI anti-inflammatory (and thus gut-sealing) effects pretty substantial.
So that's my initial advice. Even though, once we get the dog on the right protocol, improvement should be rapid, it may take a few weeks to sort out what the dog really needs given the limited findings. As long as the owner is cool with that, your dream of avoiding prednisone should come true!
Steve