It is not uncommon to see poor coat and skin health with chronic or serious illnesses. The body reserves essential nutrients for essential systems like the brain and heart. So the "less essentials" like the skin and hair miss out and as a result the pup will often look scruffy, with flaky skin or a greasy unkempt appearance.
Given her age and symptoms I think that Gypsy likely has some sort of internal organ compromise/failure, kidney disease and diabetes would be high on my list of differentials but so would a systemic infection or cancer. No one can tell you more without testing.
She has been your friend for a long time, and dogs are very good at reading nonverbal cues (voice tone, body language) so yes, I think she will respond to you being upset.
I am sure she is doing her best to act as normal as possible, because she knows that you are sad/stressed/upset. But she is a sick pup and so her lethargy continues.
She needs an exam and some testing. If finances are tight ask that all testing be done in a stepwise fashion, looking for more likely issues first. So an exam, mini blood panel and urinalysis would be a great starting point. Those tests will give a wealth of information about what may or may not be the issue.