Although I just heard about the Spider Goat story yesterday for the first time, it turns out that Forbes had written a full story on it over a year ago. ABC News also covered the story in detail a while back.

(And here's the poop straight from the source at Nexia Biotech.)

Here's the Forbes story by Christopher Helman:
Charlotte's Goat.

Nexia is tackling a materials-science conundrum that has stumped even DuPont for 20 years: how to synthesize spider silk. Milking the spiders themselves is out of the question—they're cannibals. "Put a bunch of them together and soon you end up with one big, fat, happy spider. It's like trying to farm tigers," says Turner.

By injecting the orb weaver gene into the father of Mille and Muscade, Nexia bred she-goats whose mammary glands are able to produce the complex proteins that make up spider silk. Their milk looks and tastes like the real thing, but once its proteins are filtered and purified into a fine white powder, they can be spun into tough thread.

Here's the ABC.com story:
Here Comes Spider-Goat?: Genetically Altered Goats May Lead to Strong Silk-like Threads.

Ounce for ounce, spider silk is five times stronger than steel and about three times tougher than man-made fibers such as Kevlar. And that makes the material ideal for all sorts of interesting uses — from better, lighter bulletproof vests to safer suspension bridges.

But "harvesting" spider silk hasn't been easy. Unlike silkworms, spiders aren't easy to domesticate. "Spiders are territorial carnivores, they eat each other if placed in contact of in close proximity," says Jeffrey Turner, president and CEO of Nexia Biotechnoloies, Inc. "It's like trying to farm tigers."

Now, researchers at the Quebec-based Nexia along with scientists at the U.S. Army's Soldier Biological Chemical Command (SBCCOM) in Natick, Mass., say they may have figured a way out of the sticky situation.