Welcome to YT!
I cannot imagine a young puppy having such a severe case of ringworm. That lady must have a houseful of pups with ringworm if she is a breeder. I am with the one poster who said she should be reported. Heaven only knows the conditions those poor babies live in.
Has the vet suggested a lime sulphur dip? It smells awful, but does work. Here is a link that pretty much covers everything:
How to Treat Ringworm on a Dog | eHow.com
Good luck and post some pics when you can!!