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The poor dog must be miserable. It sounds like you've got fleas in the dirt that need to be taken care of. I've used nematodes in the past to get rid of fleas in the yard. It will take a few weeks for them to break the cycle though. I've heard that eucalyptus leaves spread around an area will deter fleas, too.
You really need to get rid of the fleas and the eggs on the dog. As long as you have live fleas the dog will be bitten.
I am not sure where you are located so I don't know if these products are available where you live. However, I swear by Advantage Flea Control. I've used Frontline and Frontline Plus, but I don't get the same results. Other people have great results with the Frontline Products. I usually notice a difference with my dog after 3-4 days when I've applied Advantage.
Also, get a flea comb and comb the dog. These combs are especially made to pick out the fleas. Have a container with a shallow amount of water nearby (a tall container works best with about a 1/4 way filled with water). When you catch a flea, drop it in the water. Fleas drown easily.
It is too bad the dog can't be brought indoors. It sounds like the area where it lays is infested with fleas. If you get Advantage or another product, it should break the flea growth cycle after a couple of months. Until then, the dog may be suffering.
Whatever you do, do not pour gasoline on the dog! I know it sounds ridiculous but it is an old wives tale and a very bad one. I was at the Vets one day when they got a phone call from someone who had done this to get rid of the fleas on the dog. They called the Vet because for "some reason" the dog was in misery. It's skin was burning terribly.
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