I am going to give you the definition, word for word from my medical dictionary... "m. contagiosum - A rash composed of small dome-shaped papules with a central crater that is said to be "umbilicated" (dimpled or belly button-shaped). Cheesy (caseous) material fills the dimple's core. A pox virus causes the rash, which is commonly spread by person-to-person contact among children and young adults. Widespread lesions are sometimes identified on the skin of immunosuppressed patients. Lesions in the groin, on the genitals, or on the upper thighs usually are sexually transmitted. Treatment: Some lesions may heal spontaneously and require no therapy. Persistant papules can be removed with curettage or frozen with liquid nitrogen."
Just make sure you wash your hands before and after every diaper change to prevent anyone else in your family from getting it. I would also question, who changes her diapers during the day? She had to get it from somewhere, it didn't just float through the air and land in her diaper area. If she goes to a daycare, I would start there. You don't want them transmitting it to someone elses child as well. It's amazing how many people just don't wash their hands! It does sound as though it could go away on it's own, just like chicken pox, you just need to prevent it from being spread while she has it. Good luck and I hope your dermatologist answers all your questions.