That sounds potentially very bad. I hope Peggy doesn't have it. If you haven't noticed any of the signs mentioned, she may well be in the clear. But since you know that one of her litter mates has it, it should definitely be brought to the attention of the breeder. If she's responsible and has integrity, she won't do a repeat breeding of those dogs. It's anyone's place to inform a breeder of something she may not be aware of and that could cause much suffering of future dogs and their owners. I would definitely tell her what you have found out, adding that you thought she'd like to know so she would not breed those dogs that seem to be passing this on genetically.