None of the monstrous vermin I've seen in artwork or media look exactly like smaller vermin either. They always have exaggerated claws, giant mandibles, rougher-textured exoskeletons. Though none of this is relevent to vermin's deserved status as animals.
I still think that vermin (insects) and animals (well...animals) are different. I think that the real reason they're different is because the designers wanted to point out the differences instead of pointing out the similarities; as such, the vermin and animal types split.
You mean a 1/8th level party? There is nothing threatening about these animals. A rat does 1 damage with a bite just like a hornet might do with a sting. And again, there's nothing relevant about it.
True.
Sure, maybe in your very specific campaign, vermin may have something that makes them distinct from other animals. My campaign might have something that makes bears distinct from all other animals. In that case I would change the bears' type to match the campaign, but not as a general rule.
What I meant to say was that I felt that they felt different to me in general...still, I guess this doesn't really matter.
And my point is that thinking is completely subjective. Why should some spells not affect some critters when they're made of the same stuff - just because those critters FEEL different? (Besides balance reasons, which isn't an issue here.)
People are also animals, yet having a type of creature combine the two is ridiculous. Some spells are designed to target one creature (eg: hold person works against humans only
because that's the way the spell was "created" to make it easier to use (lower level), yet the hold monster spell works on everything). Vermin work in the same way.
Keep in mind fish (chordates) evolved from segmented worms.
On review, so did most animals...
"Most small mollusca." When does a small mollusc vermin (gastropod) become a small mollusc animal (cephalopod)?
I think that you just answered your own question: a gastropod mullusc would be a vermin, and a cephalopod mollusc would be an animal. For creatures that combine traits of both, it depends on the monster (vermin, animal, magical beast, even aberration

could be used for this).
If your trouble is that your players want to play a druid with a vermin as an animal companion, I would say yes. Still, you could always say no and then point out the vermin keeper prestige class from Underdark (FR book).