My dd says that when the skin on her labia has been scalded by wee. At that age they don't wipe themselves properly and the wee left on the skin burns it slightly. I use Sudocreme and it clears it right up. I also offer more frequent bath/showers.

You could try Sudocreme or since based nappy rash cream on the red area and see if it helps.

I would think thrush is unlikely and a it I would cause frequency, stinging and more discomfort.