Hi Katherine, my first thought when I read the title of the post was 'abscess' but that seems to have been ruled out by your vet. Has he given you any advice about the options for treatment? I would have thought with a cyst that either excision of cyst would be an option or, failing that (and sorry to have to even suggest it) amputation of the affected section of tail.
Either would resolve the problem I would have thought. Other than that, all I can suggest is keeping an elizabethan collar on during the course of antibiotics to prevent Crunchie from chewing the sore spot and making it worse. We do have a couple of vet trained people around the site, so maybe one of them will log on with some more useful recommendations ...
Welcome to Purrs, BTW, it is a fun site and I am sure you will love being a member!