Your poor horse! I have a chestnut filly (they seem to be prone to flies for some reason!) who has terrible trouble.
I'm afraid the problem is in your question. Any ill-fitting horse fly rug that has any gap will not only causing rubbing (which can in itself cause skin irritation) but will also allow the flies to get in through the gap. If your horse fly sheet
does not have neck cover or a horse fly mask you should consider getting one. Horses eyes are particularly sensitive to flies and midges because of the moisture in them.
As well as the fly rugs have you tried changing your horses diet - something like putting a garlic or Brewer's Yeast
supplement in their diet can help increase your horses ph level - this makes their blood very untasty to the flies!
Also think about fly repellent! Hope this helps!
Lots of advice at Horse Rugs - All about which type of horse rugs or horse blanket to buy