For a review of the current info on why pacifiers are used, and the implications for dental health, see: Pacifier Non-nutritive Sucking in Infancy and Early Childhood - Protocol, the intro to an evidence-based medicine review of the existing data. The conclusions have not yet been reached, though. There is data saying pacifier definitely do affect tooth development/alignment, and others saying it is more genetics and other oral habits that cause the problem.
There’s also a confounding factor that needs to be addressed re: pacifiers. It is known that the longer the child breastfeeds, the lower the risk of malocclusion (crooked teeth). And it is known that in at least some cases, pacifier use interferes with breastfeeding success and duration (only if other issues exist - it has no impact if no breastfeeding difficulties occur). So, if pacifiers reduce breastfeeding, and breastfeeding prevents malocclusion, then it is quite possible that research has correlated the wrong item (pacifier use, instead of shorter duration of breastfeeding). Or not, but until someone looks at the data more carefully, there is no way to tell.
In the meantime, limiting pacifier use is probably your least-traumatic approach. Just like other forms of weaning, abrupt may work fine for your child. Or it might be a heart-rending disaster. It is far more likely that slower weaning will not cause more of an issue.
Also, it is important to note that at this age, what you are asking her to give up is not just a pacifier, it is probably a transitional object. There are implications for taking away comfort items from toddlers and even older children. These are important objects that help promote independance, as the child takes a bit of ‘mommy comfort’ along with them, in the form of the object. Here’s the AAP take on transitional objects. You might want to consider trying to wean her ONTO a different object before you take away the current one. Because these objects are very valuable to their psychological development, just up and taking it away can have unexpected and unintended consequences. It also explains why it is SO HARD to get rid of the habit at this point - you aren’t just getting rid of a pacifier (object), you are also trying to remove something that serves as a stand-in for mommy. You might as well try getting her to agree to never see her mommy again. Sound like the level of fight you get?
Weaning from transitional objects usually happens closer to 3-5 years old (or up to 7 or so), and many people keep their transitional objects into adulthood, even if they don’t use them. The method described by Dangerosa is the one I’ve seen supported the most often.
Good luck introducing a substitute transitional object. Some kids will take to the idea, others will not. But be prepared for seeing that object around for a while to come, whatever it is. (We bought four identical blankies for our older son, so we’d always have a spare - just remember to rotate them, so they have equal wear patterns…)