itching, boils, tail-chasing

Question
Our Ger. Shep. pup is 3 mo old.  Two weeks ago two large boil type lesion appeared on his penis.  Vet's best guess is spider bites.  Now the dog is a different dog, he chases his tail almost constantly, the boils drained but more are coming up all the time about the size of the tip of one's pinky finger.  He is anxious and jumpy, he pees in the house again.

The vet feels originally they were spider bites and he is allergic to them and it has to work out of his system.  We changed his food to a hypoallergenic good, and treats.  The vet has given him steroid shots, advised us to give him benedryl and he rx'd a topical (Gen-One spray).

My concern is that the tail chasing will turn to OCD if we can't get a handle on this itching problem.  The poor little guy is miserable.  We purchased him from a reputable kennel whose dogs are well known and often trained for police work.  In a week his entire demeanor has changed from a happy go lucky pup to an anxious, tail chasing, pup who barks at everything.

We are pursuing this with our vet and will continue to do so.  But I am open to any suggestions or ideas we have not thought of.  

Answer
You're correct in being concerned that the tail chasing could turn into an OCD type behavior. But you first need to address his physical issues. I don't believe that these are spider bites and don't understand your vet continuing to treat them as such. Has he done a test to see if the boils are caused by a bacterial infection? Put him on an antibiotic such as cephalexin which is great for skin conditions? I would also really wonder about his immune system as often skin infections such as this are caused by an immune system that is out of whack. Has he done any blood work? Also please be aware that steroids can and very often do cause hyperactive, anxious behavior.
You might not like hearing this but I would seek a second opinion and soon. I tend to think he has a skin infection (maybe even staph) that could be caused by a compromised immune system,allergies,parasites, or even hormones. He should definitely be on antibiotics and I would not continue the steroids. I'm wondering why your vet didn't prescribe the oral antibiotic I already mentioned as well as muciprin ointment and a full work up on your pup. Check out this website http://www.bobmckee.com/Client%20Info/Skin/pyoderma.html
Check it out and get a second opinion.
Let me know how it turns out for your baby
Cindi