Has anyone else had any experience with "Pillow Pets" causing an allergic reaction?
My 3 year old broke out in the worst rash I had ever seen and his eyes were nearly swollen shut. It happened two nights in a row, right at bed time, and the Pillow Pet is the only "new" item in the bed. No changes to detergent or bedding/pj’s. It starts on his cheeks, where he lays on the Pillow Pet, and continues to travel all over.

I have not seen any allergies to them in my family, but there could be something in them that he is allergic to. Remove the pillow pet and see what happens.
There are so many different causes of rashes that it is very difficult to narrow down any specific cause of one, especially without being able to see it. Common categories of rash are:
scaly patches of skin not caused by infection,
scaly patches of skin produced by fungal or bacterial infection,
red, itchy bumps or patches over the body, such as on the chest and back.
Although rashes are seldom dangerous, self-diagnosis is not usually a good idea. Proper evaluation of a skin rash requires a visit to a doctor or other health-care professional. Check this site for good information and you may be able to figure out what is going on.
http://www.medicinenet.com/rash/article.htm