I have same background (raw patch that I had on the middle of my top lip which was considerably small).Raw skin and peeling spread over time due to multiple factors.In my experience, white and mushy stuff after contact with water is sign of fungal/bacterial infection accompanying
with EC.In that state, anything keep your lips moist and oily all the time(aquaphor,lip balms,vaseline,natural oils,gloves in a bottle) only worsen the condition because of fungal/bacterial proliferation due to ideal moist/oily environment for bad microorganisms.Oil-free,strong antifungal and antibacterial agents like pure aloe vera gel are good option for both treating infection and moisturizing lips.Proper oral hygiene,preventing dry mouth and a good diet are also key factors.