First, I think that he feels shame for the masturbation, which is why he's trying to put it off on you or saying that you 'dreamt' it. He's like the little kid who got caught with their hand in the cookie jar, but still points to their friend standing next to them. He knows he's "caught".
It sounds like this is either connected to porn, based on what you said, or he is just lazy. Men can get real good at hiding their porn if they think that they are being watched. If he feels put on the spot and shamed for the porn, he'll make more of an effort to hide it. So, you may think that you're doing well, until that one time that he slips up.
On the other hand, he could honestly just be lazy. When a person masturbates a lot, they get used to the instant gratification of pleasuring themselves. No one knows how to please him better than himself. It might be easier for him to do it himself than to expend the energy to turn to you. It doesn't sound pretty, but it does happen. This I know. Oh, and I also know about the avoidance issue. Yes, everything is perfect for someone who doesn't want to have to deal with problems and admit to themselves and their spouse that what they are doing is hurting the relationship. To avoid it, they can stay the way they are. To recognize the problem means that they are expected to change, and change is hard. He knows. He just pretends that he doesn't.
Here's something that I would suggest you do, just to test the waters. The next time he seems interested in masturbating, take the opportunity to include yourself through something like oral sex or being on top, where he just gets to relax and enjoy himself. If he starts to seem more receptive to you when he doesn't have to be very active, then it might just be that he's feeling lazy and doesn't want to exert himself. This would be very convenient to know, as a way of planning the proper steps to pulling him out of his selfishness.
You mentioned that he is pulling closer to the Lord. Is he at a place yet where you can leave Scripture passage for him, and he'll actually absorb them and take them to heart?