Well, this does sound like seborrhea if she is stinky, has sores, and is oily/flaky. She could also have concurrent yeast. No matter what, I'd have a fungal culture done asap. If it is seborrhea, I'd look at diet right away (what are you feeding?), con't w/ the shampoo...and...if it really can't be managed, then I'd consider steroids. When quality of life is this bad, steroids could be very good.
You may also want to give fatty acids. I like Ark Naturals Royal Coat - which can be found at Whole Foods and online. Colloidal Silver, like MesoSilver, has also been known to get rid of seborrhea.
I would also ask the vet to rule out pyoderma and a staph infection at this point.
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