Have you tried gentian violet drops? I came to learn about it from a Podiatrist. Here's a Mayo Clinic info page ... http://www.mayoclinic.com/health/drug-information/DR600723/DSECTION=proper-use. It can be purchased in local drug stores but, I suggest calling around to find the stores that carry it.
A few years ago I took an incapacitated elderly friend (not a diabetic) to get her toenails trimmed by a Podiatrist, who identified a toenail yeast infection, as explanation for her gnarly, darkened and deformed toenails. He said genetian violet would do a world of good, and was very affordable, but not very popular compared to (more expensive) antifungal creams that don't stain. Anyway, he applied some drops on a cotton swab and thorughly worked them into the cuticle, and on and under the affected nails, being VERY careful to NOT get the drops on anything else. (It DOES distinctly stain anything it comes in contact with and can't be washed off.) The Podiatrist also said to reapply thoroughly after each bath/shower, being sure to throughly dry the feet before applying, for about a month or more. He also added that there was "no magic number" of applications, but that it would "affordably kick the fungus in the pants", and that she should eventually begin to see new, healthier nails growing in - but to be patient and diligent in applying the drops.
I asked about applying lotion or cream for her dry skin's sake and he said that would be okay. When I asked about any side-effects, he said gentian violet was safely in use before he was born (he wasn't a young man!), and that there wasn't any issue with toxicity as long as it was applied externally.
Apparently, it worked for my friend, whose toenails began to gradually grow in better over the next year. Oh, the doctor also said to reapply once each month, after the initial month's treatment, until the new toenails were fully grown in. So, if you use this idea, be prepared for purple toenails for awhile. (smiling)