Ketoconizole making my dog ill, vet still wants her to take it?

Ketonazole is the best medication for yeast problems. It can cause nausea, vomiting, and diarrhea in dogs and cats, but usually the side effects are minimal. It sounds like your dog might be a little sensitive to it which is probably why your vet wants try a 1/2 dose. I say give it a try. If she does get sick again, it should not be as bad as last time. If not then she should be fine through the entire course of the treatment.

This makes me quite angry. Why on earth would they prescribe Ketoconizole (Nizoral anti-fungal) when the dog already has Pancreatitis and, presumably, impaired Liver function, when one of it's worst side effects is on the liver?

Unless the fungal infections are life-threating I'd not give that medication. Say to the vet that you are uncomfortable using that drug, and is there another that could be tried that is less aggressive on the stomach and liver?

To make the dog less prone to fungal and yeast infections its tissues need to become more acidic.

Look up Coconut Oil ( Caprylic Acid ) in the anti-fungal context. Think about improving skin condition by giving foods rich in Vitamin E and B complexes which work with zinc. For this you could give 1/2 tsp/day cold-pressed Wheatgerm oil (if dog is not gluten intolerant).

Stand up for what you believe is right, but listen carefully to the vet who should be loooking at the dog and her problems holisticly.

Hmm.. it could be the dog's immune system trying to fight the pill. it may be a side effect and if it damages the dog, then you could sue afterwards...