I think I blame the GM. Yep, betrayal. The GM should have stepped in as the divine power not to let the paladin kill the wererat. Or he/she could have said, "Why don't you take a moment to pray to your deity and see what they want you to do with Yelloweyes."
Now while I believe the paladin didn't do right, she certainly didn't do wrong. This is a fantasy world where monsters eat human babies, for reals! :-) So yeah, on a purely racial tone, the paladin was within bounds, but is this how the GM has previously set up the game world? Even if it isn't, the paladin will get a "shame on you letter" and get back into good graces, which shouldn't be hard because of this one time offense.
Being the paragon of chivalry and justice through divinity on the planet is only applied to intelligent races worthy of respect. Orcs, goblins, monsters, in laws, they're all fair game cause they enslave, kill and eat humans. The paladin needs to walk the fine line because they are the direct representations of the finest qualities of their respective gods. if they fail, they make up for it. If they quit striving, then they fall.