hi there Binky93
great description..yes i had the similiar reddness beyond my actual lip area on the lower lip predominantly and it was accompanied at the same time and in the same region with small white spots of varying sizes that appeared to be fluid filled...uggg..there was general redness in colouration of the lips and swelling size...it coincided with me after i had been taking antacids..to lower..acid in my stomach but which may have unbalanced my stomach bacteria flora..giving candida an edge...my description over the phone to a nurse and a common side symptom of taking the antacid prescription drug is "thrush" there is something called "lip thrush too" and is indeed a "fungus"..there are many reasons without taking antacids where these same symptoms can come about and/or for the upset of flora imbalance..this could be an internal aswell as a localised problem..the fact that you've had peeling lips for as long as you have suggests though it's been an internal problem and your obvious and unhappy response to taking retin is with good reason..!!!
..i pop back here now and again although my overall health has improved and lips are healed..but your vivid description regarding the redness over the border line and spots fitted my own..it was itchy too..in addition the lining of my stomach was compromised at the time although i wasn't aware of any "pain in this area"..
Theres alot of info here although of late it has gone quiet..i thought i'd respond..just to say youre not alone in this youre description matches others here and things can get better so don't despair!!
(One other thing of note which i always forget is that the large part of the immune response mechanism is actually located in the digestive tract..)
ps...i'm not suggesting that fungus alone is responsible for all cases of "peeling lips" it appears not be as straight forward but a more complexed issue where various approaches and measures perhaps need to be put in place simultaneously to address it as a whole.