Actually, Tanks under 5 Gallons can be Cycled. It's just Harder than usual since in a Tank so small, Ammonia can build up too quickly.
Here's Info about Fungus Infections:
True Fungal Infections
•Symptoms: White cottony like patches on its body or head, Lethargic, Not eating, Clamped Fins, Pale Colors
•Treatment: Conservative: Lower temperature below 76* F and treat with Aq.Salt at 1 tsp/gal. Increase water changes to 100% daily. Replace accurate amount of salt following water changes. Never continue salt treatments for more than 10 days. Medication: If Conservative treatment is ineffective after 10 days or you see the fungus spread rapidly during the course of conservative treatment, move to medication. Add “Fungus Eliminator” by Jungle, API Erythromycin, API Fungus Cure, API Triple Sulfa, OR Mardel’s Maracyn II. Change water every day and add a new dose of the same medication. Continue until all fungus has disappeared.
Hope he gets better. Good Luck!!!