This goes without saying, but for 1), talk to your pediatrician right away - don't wait for the next regular appointment. Take a food log, take pictures, keep notes on times, and then go in and show them what you have. Your pediatrician should be experienced at dealing with food allergies and be able to tell you if this is something to be concerned about or not.
For 2), I would move on to other foods entirely for now (assuming the pediatrician agrees). AAP no longer recommends starting with cereal for several reasons; there's no reason you can't start with broccoli, peas, green beans, carrots, etc. For my first child, we did cereal for a bit, but then moved quickly to sweet potatoes and carrots, both roasted in the oven with a tiny amount of oil, and to peas and green beans and broccoli, all steamed, and then in all cases food processed with some breast milk for consistency.
If those foods cause rashes also, of course, talk to your pediatrician - there may be a bigger issue here, or an unrelated issue. This winter has been hard on babies since it's so dry, so rashes aren't totally surprising - my one year old has had rashes on and off for a long time.