Yes, def do not use an oatmeal shampoo - that whole thing is a myth. I'd recommend you go on Amazon and get one from the Duoxo line; you might also want to get one of their sprays for btwn shampoos.
It's a great idea to try that coconut oil, yes.
If the itching is really this severe, then you do need to go to a vet to figure out whether this is allergies. If it is, he may need something like Atopica, Apoquel, or Temaril-P. Read more about how to deal w/ allergies here:
http://www.yorkietalk.com/forums/die...tart-here.html