The fry may or may not be deformed. It depends on the genes from the male. However, if she was born like that, she's inbred. No need to make fry even more inbred, so I'd recommend you don't breed her.
I see guppies of all sort like that at my lfs. I want to buy them because i feel said for them, but I know they have less chance of producing well because they are inbred, I try to buy fish from different stores to not inbreed them