"Picking at the lips, like picking at wound, is abnormal to the function of the skin, therefore if it is constantly done, than the skin is going to have an adverse reaction."
I think there's your answer. If you pick at any other wound or scrape, the skin that grows back will not grow deformed or mangled. It'll grow back normal, over and over again. You may have scarring, yes, but the skin will do it's job. It will not behave like a scab.
As for leaving it alone: I believe it will work, but you'll have to keep it at it for a long, long time. This I wasn't willing to do. At one point, I even consigned myself to a life of constant lip-management. I have things to do, people to see, I can't walk around looking like I contracted malaria. That's how I thought of it.
Anyway, best of luck to you...let us know how things go.
P.S. Remember that Daniel also left them alone--but by the end of his year or so of doing that, he started keeping his lips constantly moist with aquaphor. Please don't like your disbelief prevent you from trying every single option. I know what it's like to live with this horrid situation, so I wish you the best.