I have dealt with this chronically over the years and, yes, it is worse if the fabric has not been washed. I've never been able to completely prevent the cracks around fingernail base and they are too, too painful. (I just made 53 lined tote bags for an upcoming Christian retreat, so I'm in the throes of the cracks right now.)
Here's what I do: At night, Neosporin covered by bandaid. By day, Liquid Bandaid or NewSkin which puts an almost plastic-type cover over the exposed area (yes, it burns for a minute or so, but seals everything up). When it gets really bad, I find that the hot wax bath (Dr. Scholl's- WalMart) causes the healing oils to permeate the skin/cracks and it heals very quickly.
In between, I use an intensive care, heavier type lotion several times a day.
A real pain in the butt, but quilting is worth it.
Hope this helps.