One turned to horse by a dramatist, she to something smaller (7)
I believe the answer is:
'one' is the definition.
Both the definition and answer are singular nouns.
Perhaps you can see a link between them that I can't see?
I can't explain the remainder of the clue.
Can you help me to learn more?
(Other definitions for arachne that I've seen before include "She was transformed to a spider in Greek myth" , "Greek girl who unwisely challenged Athena and ended up as a spider" .)