I am sorry your fur kids are having this trouble.
It sounds like milary dermatitis which is an allergic reaction
Read more here:http://en.wikipedia.org/wiki/Miliary_dermatitis
Even if you do not see any fleas, one tiny bite can cause this reaction.
Yes, wash all their bedding because teeny flea eggs can hatch and bite the cats.
You can use advantage, frontline or revolution to control any fleas.Some are sold OTC in pet stores.
You can bathe them in dawn dish soap. Leave the lather on ten minutes. The foam will also kill fleas.
You can dab plain neosporin on any sores. It is mostly vaseline, hence safe to lick.
I sprinkle diatomaceous earth in corners of my apartment as it kills all insects and is quite safe.
Get it at a garden shop or online:
I am in Florida where fleas/bugs/worms are active 24/7/365 and it works like a charm for me.
I hope your babies and you get relief very fast.
If you have more questions just press reply and I will be here for you.