OMG...our dog is doing the exact same thing!
We have two beagles, m and f 1.5 years old, and the female for the last 5 days has been compulsively sniffing a section of our backyard, about 20 metres across by 5 metres wide, so much that the skin under her nose is very irritated and bright red.
We watched her on the weekend and she only seems to do it obsessively at night (they are beagles so they do tend to sniff a lot anyway) from about sunset. She will stay out there for hours and we finally made her come inside and go to sleep at 10pm last night. The male dog pays her no attention at all, doesnt seem in the least interested in anything in particular in the grass and is content to come inside and sleep while she is doing this.
We've been at our place for over 2 years and never had this happen before. We have a dog door so they have free run of the backyard and can come inside when they choose. Her nose seems to improve a little, to a dark pink, during the day when she isnt sniffing. Both dogs have recently had very mild contact allergies on their feet, we suspect from some wandering jew vine we've found further up at the back of the yard.
We thought there might be a grub in the grass or some sort of fungi she is smelling coming into contact with the nose? Our vet has only suggested to increase the dose for her slightly of the medication she is still on for the foot allergy and to see if that helps with the irritation.
Have you had any success with the other solutions suggested?