How to treat dry cracked skin on heel, without softening skin too much?  

Dry skin. You can try removing the dry cracked area carefully. There are creams that will help with this - urea in them. Soaking can dry the skin as the oils leave the skin especially when soaked in epson salts.
Creams will help. Dry, thickened, cracked heel skin may or may not have some athlete's foot fungus in it. One can try lotrimin (clotrimazole) af cream 2-3 times a day for a couple of weeks, and then switch to a non-medicated cream such as cerave, cetaphil, or eucerin. If not much improvement, a primary care doctor or a dermatologist can evaluate and offer more recommendations.