Fashion shouldn't hurt. If your sequined dress is causing a rash, examine the fit and design. Common places for chafing from sequins may be under the arms or along the collar. You may need to enlist the help of a tailor who can lower the arm holes to prevent uncomfortable rubbing or add facing to a rough seam.
Less Drama
Another potential alteration to the dress would be to have a tailor remove the sequins from the area that is causing a rash. Adding a liner to a bare dress may also help. If you're not willing to change the dress, you can try using a product designed for athletes to reduce chafe. These topical sprays and balms form a light barrier between clothing and your skin without leaving a greasy film or stain. Sequins are typically rougher than your average wetsuit or technical sports fabric, though, so these may not offer enough protection.