Dear S.,
My heart is really going out to you because I went through this with my daughter. I really hated giving such a small baby what seemed like serious medication, but it really helped her. I did a few things that together, made a huge difference in her comfort. I was nursing, so I took all dairy out of my diet (even hidden milk-related ingredients in baked goods, etc.). Just taking out milk and cheese wasn't enough. Tomatoes also had to go. When I did supplement with formula, I ended up using Alimentum, which she tolerated really well. At 3 months, we put her on Zantac, and she napped for the first time since she was a 3 weeks old (she would only have these half-hour "catnaps").
But she was still in pain with eating and when we added Prilosec she got much better. So for us, the combination of Zantac and Prilosec was what worked. Zantac inhibits acid production, and Prilosec inhibits the mechanism that pumps acid into their stomach. We had to adjust the Zantac dosage as she got bigger, and we could tell when we needed to do it because she would be doing better for a while and then relapse until her pediatrician upped the dosage. I questioned myself every day about these meds, but when we didn't use them, she was in such terrible pain, and we really tried all the other suggestions related to diet, keeping her upright during and after feeding, etc.
Like you, I did not feel right about adding rice cereal to formula. There are some studies that say that babies who are fed this way do not learn how to tell when they are full and this leads to greater chance of being overwieght when they get older. Here is a link on that but I am sure you could find more info online: http://www.parenting.com/article/Baby/Feeding/Mythbuster-...
The other things that helped soothe her and helped her sleep were swaddling her in the Miracle blanket (if we didn't swaddle her tight enough, she got more upset, but getting her snugly wrapped up really relaxed her once she was bundled). We actually did this until she was 5 months old and too big to swaddle. And I got a sleep incline wedge made out of memory foam which helped a lot. The other main thing was using Baby's Bliss Gripe Water (amazing results - made with ginger and fennel which are natural digestive soothers) and a pacifier. Sometimes to get her to sleep I dipped the pacifier in the gripe water and then gently held the pacifier for her until she fell asleep.
I bet this sounds rediculous to anyone who doesn't struggle with reflux, but when your baby screams, when you feel like your attempts to nourish them are causing them severe pain, and when they (and you) don't sleep for more than 45 minutes at a time, day or night, you try a lot of things and do what you can to help them heal, sleep and grow.
A website that I found that was also a source of support for me was "momswearingpuke.com" but I don't know if that is still around. Another great one is Kellymom.com, which is centered around breastfeeding but also has a lot of great information on food sensitivities and reflux in general: http://www.kellymom.com/babyconcerns/reflux.html.
OK, this may be more than you asked for, but having gone through this, it will be really heartening for me if I can help others. Let me know if you want to exchange emails or talk "offline" some time. Keep following your instincts, and know that you are not alone!
S.