hmmm I was fortunate in that my son only had a little cradle cap.
according to my "what to expect" book...
"Mild cradle cap, in which greasy surface scales appear on the scalp, often responds well to a brisk massage with mineral oil or petroleum jelly (thats Vaseline) to loosen the scales, followed by a thorough shampoo to remove them and the oil. Tough cases, in which flaking is heavey and/or brownish may benefit from the daily use of an antiseborrheic shampoo (the one from mustela) that contains sulfur salicylates such as Subex (make sure you keep it out of the baby's eyes) after the oil treatment. (Some cases are aggravated by the use of such preparations. If your baby's is, discontinue use and discuss with your doctor). Since cradle cap usually worsens when the scalp sweats, keeping it cool and dry may also help - don't put a hat on baby unless necessary (when outside in the sun or when its cold outside) and then remove it when you're indoors or in a heated car.:
From that I would try massaging the baby's cradle cap with a baby sponge and the mineral oil or vaseline (petroleum jelly)... then follow up with the mustela shampoo.
When my son's skin got dry (but only his arms and legs from when it was cold) we used Oilatum in his bath - you may consider that if your child's skin is dry.