I don't think Benadryl long term is unhealthy, but it may stop working. If your vet said it was a contact allergy that means something he is actually touching, not like a food allergy or allergy to flea bites, medicine, etc.
Watch him close, it could be something your washing your bedding or his bedding in, a plant or grass outdoors, carpet shampoo, mopping solution, etc., it could even be the frontline.
The reason people say it gets curlier when cut is because it doesn't have the weight long hair has that keeps it pulled down. Cutting isn't going to change anything. The best product for tangles and a cottony coat is Cowboy Magic Concentrated Detangler and Shine. Check
www.cowboymagic.com for a store near you. I paid $23.00 for 12 oz., but a little goes a long long way.