Kat, I'm going thru something similar with Patsie. She got a couple hot spots between her shoulders, and near the base of her tail about a month ago and then she started getting little red lesions on her legs, and ears, it looked similar to shingles. She was itchy and her hair started falling out all over; she has thick soft bunny fur so it'll be a long time before she'd ever be bald.
The vet thinks it's an auto immune disease caused from a flea bite, but I can't think of the big long name he called it. We're treating her with antibiotics(clavamox) and she received a steroid injection, and there's been a big improvement. I'm also bathing her once a week with chlorhexiderm shampoo, and spraying her daily with 4% chlorhexiderm to help with the itchies. We also checked her liver values and they were normal.
You might want to ask your vet about the possibility of an autoimmune disease and maybe try treating Fallon with steroids to see if he improves.
Hugs to you and Fallon.