Hey there.
I agree that talking about it to him is going to be the best. Do take care to be gentle though...being too harsh on him is only going to make things worse.
I absolutely agree with you that the towel thing is WAAAY too much. :/ I can understand not grasping oral sex (not everyone has done that

), but the towel because "It's too squishy"...that's a hair much. He has to understand that lubrication is a natural part of female anatomy, and that by depriving you of that is uncomfortable. If he doesn't grasp that, equate it to self stimulation without lubrication. I think it'll drive your point closer to home.
As far as teaching goes, it's going to be a matter of patience. Be gentle, and simply cover the bases (so to speak) as to what you like and don't. You may (perhaps to the benefit of you both) want to incorporate the lesson in a more...hands on sense, so to speak, than a cut and dry lesson. He'd be more receptive to that I would think, and it could help the two of you grow closer.
I wish you both my best, and good luck to you both.
Harley