Yes, anything wet can bring in disease and parasites. Everything wet that is not a fish should be QT'd a minimum of 4 weeks in a fishless tank. All fish should be QT'd in a bare tank (no live rock, but with places to hid like PVC tubes and plastic plants.
NEVER LEAVE A FISH IN A DIP UNATTENDED! EVER!
It sounds like brook; might be marine velvet or ich. Probably brook with the apparent quick onset. 11% formalin for 30 minutes will literally burn the skin off a fish so yes, the scabs will fall off without necessarily affecting a cure.
How to test for Marine Velvet aka Amyloodinium:
http://www.petsforum.com/personal/trevor-jones/oamasfwdiptest.html
(Do not do this tonight, the fish is already very stressed - use the water you have now.)
How to treat marine velvet:
http://www.petsforum.com/personal/trevor-jones/amyloodinium.html
(Requires very careful use of copper.)
How to ID and treat brooklynella:
http://www.petsforum.com/personal/trevor-jones/brooklynella.html
(Except you need daily treatments for several days.)
The fish must be moved to a QT tank for treatment. Before the excuses begin, lets be clear:
If you do not treat properly and use a QT, the fish will continue to be reinfected in the main tank and will never get cured and will die.
If you do not treat correctly, the fish will die.
If there are other fish and they are not treated for velvet (if the dip test gives that as a diagnosis), the other fish will become infected and die.
Both copper and Formalin can be deadly if used incorrectly, but used correctly will affect a cure.
Brooklynella usually kills in days by the time an infected fish gets to a consumer. Time is of the essence.