This is not the Liver that filters blood as we've learned from Western medicine, but the Liver that circulates the Qi energy in the body, the Liver that stores the blood and the Liver that gives rise to internal wind. Wind has a unique symptom of itching, when it is lodged beneath the skin. The atrophy situation is not something that I can explain at this time. But that's only for now. Probably it has to do with a Liver Blood deficiency giving rise to the dermatitis.
Blood is said to nourish the skin in Chinese medicine.
My suspicion is that the Liver blood deficiency is effecting the functional activities of the muscles that are nourished by blood in the Liver meridian which just so happens to pass through the genitalia. The sclerosus, or the hardening of the skin tissue, is probably indicative of the progression of the skin problem. I'd be open to corrections on this part, if there are any practitioners with experience with this. Another unique Liver blood deficiency symptom is waking up in the wee hours of the morning and being unable to fall back to sleep. Anyway, the acupuncture will help with the stress if this condition is in fact aggravated by stress, otherwise you'll want to be thinking in terms of Chinese medicinal herbs to treat your condition.