Well, first, COOL story/adventure! Your players sound like they're having a great time.
A couple questions:
1) What happens to Scabs? What should I have happen with him? Should I "steal" him from the PC's control? What are his new powers?
Seems pretty straight forward.
Scabs becomes a paladin of Lolth. I don't think taking him away from the player is necessary. Just give them paladinic powers.
Which edition is this again?
Well, in general terms (mechanically tweak it however you need for your system. I'm sure this has been created somewhere before...but since I don't know about it, off the top of my head...):
Paladin of Lolth
Detect Good (natch).
Lay on Hands, as normal.
I see no reason a paladin's aura of protection can't work just fine, just that it only works against demons that are NOT on Lolth's side/her control. Maybe an extra penalty for demons working under Zuggtmoy's?
Doesn't turn undead but turns (and extra damage to) fungoid creatures?
Spider Climb seems a legitimate power at some point.
Speak with Spiders.
"Sacred Mount", when she gets that far, giant spider, obviously.
2) The player is very keen to take up the mantle of a paladin by dual-classing, but she does not meet the minimum requirements. How can I help her reflect her new mission?
Well, Lolth said, "Power you shall have, Champion."
Sounds like Scabs has the requirements now.

Bump her stats to the absolute minimum required. Pal. level 1 and off you go.
Of course, as soon as she does the
slightest thing against Lolth's wishes, back to non-paladinny Scabs it is.
OR, just turn her into a drider.

...drider paladin (i.e. no more thieving for Scabs)?
--SD