I would advise you to find an LBS that can do a professional fit and one that will treat you and your body with respect. What part of the country do you live? There are lots of us here who know great LBS's that we could guide you to a good place.

Also, buy a book that can show you what/how to adjust or search "bike fit" online. There are tons of sites and they can help you get more dialed in until you can get everything evaluated by a pro. I have a strong suspicion though that they sold you a bike that doesn't fit you. Top tube height and leg length is only the start. Don't let them off the hook for selling you a bike that they didn't fit you to correctly.

I'd go with the chamois butter. It washes out nicely. But, let things heal in the meantime. You should never be bleeding from riding your bike. That azzhole that suggested you toughen up down there is an idiot.

good luck. I hope you are back on your bike and enjoying it very soon.