2yr old dry skin above lip and top lip irritated and or dry. Regular cetaphyl atopic stings. Is it ok to put vaseline?  it's red, irritated. Other?

Vaseline is ok. Persistent dry or chapped lips is lip eczema, which can be treated like skin eczema, using Hydrocortisone cream plus vaseline or aquaphor to retain moisture. Sometimes, lip sunscreen chemicals can cause an allergic reaction on the lips. Other times, a person is a primary lip-licker (it's his habit). Once cracked, lips get irritated by routine foods, juices, & saliva. A doctor can sort things out.
Vaseline is fine. Vaseline can actually be a very good moisturizer. In young kids rashes around the mouth and lips can easily be caused by saliva, which can be very irritating and drying. I usually try to avoid steroids on young ones faces but occasionally for severe cases a weak steroid for a short time can work wonders. Talk to your pediatrician if it does not resolve on its own.