Jan,
Case one: If it's an allergy maybe mom can try putting some of the cream on
the tender skin inside her elbow on one side and some of the formula on the
other. It's called a patch test and if it's a contact dermatitis she show
some symptoms on the arms. I had a case like this a while ago. (I posted to
lactnet) In that case it turned out that it was a combination of contact
dermatitus, thrush and secondary bacterial infection. It was a real mess.
 The dermatiologist also had questions about the pH of the baby's saliva.
Unfortunately this mom gave up.
Case two: First, try to get the baby to forget about the breast for a day or
two. Maybe mom's been trying too hard and the kid is "breast-phobic." Look
for tortocollis, fractured clavical, sores in the baby's mouth anything that
might cause the baby pain. I had a little guy once who would scream everytime
he just saw the breast--he had a fracture clavicle. Mom was finally able to
get him to the breast by first holding him against her bare chest without
asking him to nurse. Then she tried sitting him in a car seat and leaning
over him to breastfeed--it worked. She figured if the broken collar bone hurt
when she held him,  maybe if she didn't hold him he might be willing to
nurse. (really inventive mom) She eventually was able to pick him up to nurse
but it took a few weeks.
I'd also  look at the tension level of the mom.  When the mom tries to latch
the baby on--you hold on to mom. Is she tense? Do her muscles feel tight to
you, especially in her forearm or hand?  Sometimes these babies pick up on
the muscle tension in the mother and "wig out"  If you get the baby relaxed
and you latch him on (without letting mom touch him) what happens?  If the
baby seems hyper sentitive all over--can't stand to be undressed, panicks at
movements, etc-- then maybe brush therephy and massage will help.  If mom is
too loose or awkward, then maybe she needs to be shown how to make the baby
feel more secure in her arms. (I've seen both ends of the scale with this)
Once this little kiddo has forgotten about the breast I would try gentling
back to the breast and re-birthing.
Good luck,
Marie Davis
Moreno Valley, CA