Kirk,
I have had a similar rash, aggrevated by pedalling on an exercise bike. I can feel the pain just looking at your picture.
I met with an exercise guru who recommended getting pedal extenders for my recumbent bike. This puts your thighs further apart and avoids the chaffing. You'd have to look around but they're out there. It's possible to rig something up too. Anything that moves the pedal position out from the centerline.
This exercise expert also recommended a rowing machine, which was the direction I went, because there is no pain to my knees.
http://www.drmcdougall.com/forums/viewtopic.php?f=17&t=858With the McDougall diet and daily rowing, I've been able to lose 75 pounds and no longer have chaffing. Good luck.