I'm so sorry you and your son are struggling so much.
My grandma has dementia and she has psychosis as well. The distraction thing works well for her too because it prevents her mind from wandering.
When it comes to meds, we don't try to remind her that she's experiencing psychosis. We used to do that, but it only agitated her, and then she was less likely to take her meds. (She thought we were lying to her.) What REALLY helped us was reminding her about the other symptoms her meds (Haldol and Zoloft) helped with. For example, her delusions would cause lots of anxiety and they would affect her ability to focus. So instead of talking to her about her psychosis, we talked to her about the other benefits of her meds. We never *lied* to her about her psychosis, and we never *lied* about the meds treating her psychosis; we just focused on the other aspects that the meds treated. Maybe that will help you out? Also, we only talked to her when she was distracted, like when she was watching TV. It prevented her psychosis from affecting our discussion.