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This is just my speculation but.. they say she killed another evil witch and completely overhalled and changed her own looks..
I get the feeling the "bad witch".. that got crushed was the original witch of the house/ town who summoned MC. So just my speculation but MC is not the bad witch from all the rumors, she herself belives she may be but is infact not.
Mc is mostlikely the result of the last experiment the bad witch made before it backfired and she got crushed. This could explain MC's apearnce as the witch was experimenting with Soul Binding, and MC gained the dead witches magic because the experiment backfired.
Everyone seems on edge because of the Bad Witch rumor, yet there was Zero evidence of anything bad ever having been done. This is also true about the "bad witch", all the duke's ppl could find were rumors of her turning ppl she disliked into frogs and a rumor that she turned the grape harvest into mice. Yet no evidence other than the rumor themselves.
I hope this dosn't end up going the "she bewitched everyone" route, just because shes a good and likeable person..