What I see here is that your daughter is in the middle of figuring out who she is. That never comes without a certain amount of upheaval.
I think you should focus on a few things that you can actually do something about, rather than trying to “fix” your daughter top to bottom. I would address the fact that she told your husband that she’s feeling stressed about seeing you. If she’s going through (or might be about to go through) any mental or emotional issues, it’s very important that she feel she can confide in her parents. I know that therapy isn’t something you can just order like a pizza, but would you have time to find a family therapist, and have the initial intake appointment, between now and when she comes home for Christmas, just so the two of you can have one or two sessions while she’s home over break? Remember, the idea behind this is not to address every issue your D might have right now – just for the two of you to be able to talk through your own relationship so that she can feel comfortable seeing you and communicating with you again. Fixing that relationship may have a helpful effect on other aspects of what’s going on with her.
With regard to her grades, I really think I would let her deal with whatever happens and the consequences from it. It sounds to me like she really did try to get back on the right track over the summer after getting that wake-up call in spring – but she was too ambitious with her class schedule, and then she started hanging out with these non-college friends, and it just wasn’t possible to do well academically under those circumstances.
I would talk to her over break, not in a judgmental way, but just laying out the facts for her. She can’t be both an ambitious, competitive college student taking a hard courseload, and a partier who only focuses on getting tattoos and piercings, scoring weed, etc. Don’t tell her that the first lifestyle is the good one and the second lifestyle is the bad one – just that they are simply incompatible. So she needs to figure out whether she wants to have one or the other, or somewhere in between. She can take a less rigorous courseload next semester, see her new friends less often, and remind herself that there simply aren’t enough hours in the day to do everything her friends do and also succeed in class, so she’ll have to restrict herself to only going out or only hanging out with them one night per weekend, or something like that.
Do NOT threaten to quit paying tuition and bring her back home! That would be the worst thing for her from what I can tell. Like I said, she’s figuring out who she is. Being a lesbian doesn’t have to mean smoking a lot of weed and getting home-made tattoos (which I agree with you is scary, but that is not something you can control!). Right now this is what looks to her like How To Be A Lesbian, but as she meets more people in the LGBT+ community she will realize that there are a lot of ways to be lesbian and they don’t all involve flaunting your countercultural cred all over the place.
If she gets put on academic probation as a result of her grades, I agree with @compmom – you don’t have to make her come back home to live. A job at Big Coffee (love that) will probably not pay her rent, so yes, you will have to in part subsidize a lifestyle you don’t approve of. But in the long run she is FAR more likely to get back on track and get back into classes again if she is living on/near campus, still seeing her student friends, maybe taking part in campus activities, than if you bring her back home where she will have no friends since they’re presumably all off at college. Remember, your job is not to punish her, it’s to make it possible for her to ultimately succeed.