Why do I itch so bad all the time? Is it dry skin, or some rare internal disease?

Could be either. Itch can be due to an internal disease like cancer or hepatitis. But dry skin can also lead to itchy skin. I suggest seeing a doctor who can do a complete pruritus (itch) evaluation for you such as a dermatologist. In the mean time you can treat dry skin by a gentle skin care regimen: short lukewarm shower once a day with gentle soap (dove), pat dry skin and apply thick cream while skin is moist.