I have that problem with WOTA. I was talking about it in my blog, as I'm currently knitting clogs for Christmas gifts. Ingrid suggested putting the yarn in the freezer for a bit, as that is supposed to help the fly-aways stick to the yarn. I haven't tried it yet, because there is no room in my freezer. Right now, I just take allergy pills as I need to.
As for the itchy hands, using moisturizer right before knitting might help, if the itching problem isn't too bad. Moisturizer can create a bit of a barrier and help keep itching away. If it's severe itching, or causes a rash, then moisturizer won't be enough.
I hope you figure out a solution. Knitting allergies are no fun!!!