Hi - yes it can quickly spread to the whole flock.
although it looks nasty, Orf is not fatal in its own right, but secondary infections can be picked up which can be fatal.
There are several homeopathic type remedies as mentioned above. and there is a thread on the forum praising sulphur for orf (as a lick with salt).
If it were me personally, and just one lamb for now - I would seperate her and her ewe and treat with orph paste.
Thanks