Hair loss has many causes
Alopecia areata might give extensive hair loss but not this degree of scale and crusts. Psoriasis would not give this level of hair loss. Hair loss, broken hairs, scale and an inflamed scalp all suggest a fungal infection.
Samples grew Trichophyton tonsurans, a fungus becoming more common in Australia and overtaking Microsporum canis as the commonest cause of tinea capitis in children. Oral terbinafine is recommended.