try using the same stuff that people use on their breasts when they nurse. Your dam may need to see a vet. I had a girl that had her first litter and she was red, raw and inflamed, she got an antibiotic from the vet and some topical cream as well.
There is a product called "Udderly Smooth" is was originally invented for use on cow udders for the same thing you are experiencing with your dog. Apply on the teets as directed. Apparently it works so well as a skin conditioner, healing cream and moisturizer that it can be found most anywhere.