This scabbing and peeling of the lip are symptoms of the lip skin being too dry. It's just that the dryness is only visible on part of the lip.
The fact that using lip balms didn't help much doesn't mean that the problem is not dryness of the skin.
When I had less severe EC, aquaphor and lip balm could fix it. When the crusting got really severe, I couldn't use lip balm any more. It's not that the lip wasn't dry when it got more severe. In fact, it was much more severe level of dehydration of the lip skin. It's just that the crusts protected the skin better from dehydration than the aquaphor and the aquaphor caused the crusts (a natural protective barrier, a bit like a biological bandage) to fall off.
In my opinion, why Xerostomia causes or contributes to EC is that the dehydration of the skin is starting on the inside the mouth (on the labial mucosa), not on the outside of the mouth.
Lip skin is actually naturally the driest part of the body because it doesn't have its own oil glands. It relies on proximity to the mouth to hydrate it (if you think about it, the mouth is kind of like a natural humidifier). When the mouth gets too dry, the mucous membrane part which transitions to the dry outer lip (the labial mucosa transition to the vermilion), loses it's moisture so it starts getting dry, scaly or crusty. When this happens, the outer lip loses it's moisture as well because the outer lip relies on its proximity to the wet inner lip to remain hydrated.
I think this is why everyone's EC in the pictures I posted seems to be more severe near the inner rim of the mouth (that is, near the wet/dry border).