Describing things like this can be very difficult!
It’s not possible to positively identify this without actually seeing it of course. However it would seem to be causing Rose discomfort with the licking and the fact that she resents it being handled. The lameness is probably related too although we would have to always consider a separate issue (eg arthritis, strain, injury, etc) but I’m sure your vet would have checked for that.
So first what are the possibilities? An inflammatory nodule is a strong possibility. So this may have started out as a penetrating injury, insect sting, spider bite, etc. Perhaps something quite insignificant. The lesion is then perpetuated by Rose continually licking at it as that causes the release of histamines that can be the root cause of the irritation. It becomes a self-perpetuating problem. It’s unlikely that there is still any foreign material present as there is no discharging sinus.
It may also be a skin cyst or growth of some sort, sitting below the surface and causing discomfort when it’s compressed (walking). Interdigital cysts will occur in that area (and Chows are a bit prone). Your vet is thinking there may be something under the pad…I guess that could still be a corn…they will often appear at the pad margin and can be deep.
It’s gradually worsened so it needs to be dealt with. Ointments are of limited value when the patient is licking a lot and most probably the lesion is too deep anyway. A course of cortisone and/or antibiotics could be tried…you could ask your vet about that. However it sounds to me as though a surgical exploration might be the best option. There’s not a lot of room there and we would prefer it to not get too much bigger to get good closure
I hope I’ve been of help. Please contact me back if I can assist further.
Kindest regards, Peter.