There are a lot of ways to judge someone's abilities, character, and values. Agreeing with one decision is sometimes relevant - depends on the decision. If she committed a crime, or even if she had a boyfriend over at your house, that's relevant. Having sex probably isn't relevant. After all, you have no idea about the sexual activity of any other sitter - and it's really not anyone else's business. She's very young and very excited about this baby, and whether or not you (or I) think it's a good decision is beside the point. She was good enough to watch your kids at 17 and 18, and you knew nothing of her sexual activity or anything else. She did a good job with your kids and you've kept her on.
I don't see why you have to discuss it with her. You're not "firing" her because she doesn't work for you on a regular basis. I certainly think she's in for a rude awakening about how tired and how broke she's going to be. Right now she's in the fantasy phase, thinking about cute clothes. She doesn't realize she won't be able to afford them, but it's not up to you to burst her bubble. On the plus side, she has some experience watching children (yours) and in seeing how to run a house and keep the environment safe for kids.
I don't know why the pay would change if you use her. I assume you mean you would pay her less? Why? Would she have less responsibility or less work for you? I doubt it.
She's going to need some adult support and advice, so I would applaud you for saving up some baby clothes, and you can alert her to garage sales that have baby equipment. That stuff is very expensive, as you know. If she asks about future babysitting, I think you can be noncommittal and just say, "Let's see how you are feeling. You're going to need to take some time to focus on your baby and your own health and rest."
As far as considering people's character, are you planning to investigate the personal lives of public school teachers? Do you know anything about local Sunday school teachers or Scout leaders? Hockey coaches? What matters is whether they are good with children and whether there are any risk factors involved (criminal activity, drug use, that sort of thing). You have no idea if any of those people have had children out of wedlock and I hope it wouldn't make a difference.
You need to understand that ALL young people lack full skills for predicting consequences and therefore sometimes, even often, engage in poor decision-making. The human brain is not fully developed until age 25. So be prepared for your own kids making some dumb decisions in life, especially in their teen years and early 20s. I think if we all look back, we can pick out dozens of things we wish we'd done differently. What is the true judge of character is how someone deals with those decisions, and whether someone learns from them.