Definatly check for cushings the first signs of my dog having it was excessive drinking, an increase in appetite, and a swollen belly.
My own instinct would be there could possibly be Cushing's or Hypothyroid or both going on here.
I think the best thing you can do is take her for a second opinion to a completely different vet, preferably someone you know is very good, in your area.
I'm sorry to hear about your dog.
I guess if it were my dog, and I was not convinced about the diagnosis of Diabetes, as being the cause of all of her problems, I would definitely have the vet check her for Cushings..this would explain the swollen belly, excessive drinking, and skin issues, and muscle weakness... I would also have the vet check for the possibility of Hypothyroid. From what I understand, Cushings and Hypothyroid, often go hand in hand.
I wish you the best with your dog.
Check in often, as other members of this forum may reply.
Connie