I recently beat the spider in my Impossible Paladin game, but not without losses. As others have said, the easiest way to win is with Royal Thorns (spamming the whole map with thorns so that the spider can't spawn any more spiders), but without them, it's a little harder.
Basically you need to get the battle finished by turn 20 or so, as the spider stacks get unmanageable by then.
To do this, you need a mixture of direct damage on the spider (spells, ranged units) and tank units to mop up spiders. I am a big fan of the Ghost Blade spell, which costs 10 mana and does quite a bit of damage on single units. Maybe 1200 by this stage of the game with Distortion 3. You will need mana regeneration for this to work though.
The best all purpose unit for this stage is probably the Royal Snake (no retaliation) as it will do a lot of damage on the giant spider and not be retailiated against. Then I would have one ranged unit like Cannoneers or Archers to hit the giant spider every turn, leaving three tanks or two tanks and Shamans. Good tanks are Griffins and Dwarves at this stage.
So a team of Royal Snakes, Cannoneers, Griffins, Dwarves and Shamans is a good balanced team. With mana regeneration (let's say 4 per turn) you can use Ghost Blade maybe 10 times if you are lucky. Royal Snakes and Cannoneers attack the giant spider every turn, and Dwarves and Griffins mop up the small spiders. Shamans cast totems as decoys every time they can, and dancing axes on the giant spider. They are a good tank too if required.
I should say here that Frenzy is a very useful skill in boss battles in general. It stacks, so your tanks should get stronger and stronger, which partly compensates for the larger spider stacks.
This won't get you a zero loss win, but it will get you a win providing you have sufficient mana and leadership.
