It would be very, very unusual for an old episiotomy scar to become problematic. You say you experience dryness, irritation, and a “tearing feeling,” which sounds to me entirely consistent with vulvodynia (also called vestibulodynia or provoked vulvodynia). Other ways the pain has been described are “sandpaper,” “cutting,” or “ripping.” The most common experience with vulvodynia is pain with intercourse, and usually not with other activities (although sometimes women have sensitivity when wiping after urination). There may or may not be vaginal dryness.
If the pain you’re experiencing is related to atrophy, which is very common and usually evident by vaginal dryness, the Premarin vaginal cream you describe using should be quite effective for that. A topical steroid, which you’ve also been prescribed, would be helpful if there’s an identified vulvar skin condition or dermatosis, but I’m not sure any of your descriptions indicate that the steroid is beneficial. You also asked about the Mona Lisa Touch, which has been shown effective for atrophy, but not vulvodynia, at least thus far.
For patients with vulvodynia, I use a compounded prescription of low-dose estrogen plus testosterone applied to the opening of the vagina (the introitus) two times a day for 12 weeks, tapering to once a day or less. Another option might be Intrarosa, a relatively new treatment for vulvovaginal atrophy, which I’ve begun using with some vulvodynia patients. Intrarosa is a vaginal insert, used nightly; it’s metabolized to testosterone (and estrogen) in the vagina, so I think this is going to help vulvodynia.
Note that vulvodynia can be difficult to diagnose, because the vulva and vagina may look normal. Describing your symptoms accurately will be extremely helpful!