Does cornstarch really work on diaper areas?

Yes. I use it when i suspect a diaper rash caused by yeast. I use it in conjunction with some kind of anti fungal cream such as lotrimin (clotrimazole). Yeast diaper rashes are usually in the creases (but not always). You can google candidiasis if you want to see some images.
Yes and no. Some find it a helpful drying agent to reduce the sweaty moisture of an infant in diapers. I find the idea less than helpful on many occasions because starch is basically food for germs.Talc is an alternative.