Damn, that's got to suck--
I'm not on T yet, and therefore am not any authority as to what this could be caused by, but maybe lotion would help for the dryness, or even medical-type cream with a numbing agent (I think most anti-itch creams have this) for the pain. If you can find pants and boxers that manage to not get too close or put too much pressure on your crotch, that could also help (softer boxers, as well. They might not make much of a difference in the pressure, but in my experience rough clothing is never pleasant to wear, especially around a sensitive area).