"She turned me into a newt... I got better"

Clearly, plain and simple, she is a witch!

First Reason:

                She appears in an isolated forest clearing that would seem quite out of the way.  Did she just magically teleport there or something?  He arrived there by horse, but it said nowhere in the text that she had any horse.  Second, what does she eat?  Nowhere in the text does it mention dead animal carcasses surrounding the forest clearing.

Second Reason:

                Her first appearance is in place of the disappearance of twenty-four dancing virgins.  So are twenty-four dancing virgins a metaphor for the youth that she, being the witch that she is, has left?

Third Reason:

                She turns from the world’s ugliest old hag into a beautiful fair maiden in one day’s time.  How is this even possible?  Clearly, because she is a witch it was possible!

Fourth Reason:

                But what is the nature of a witch but to be wise and full of trickery.  Seeing the knight on the way home to face his punishment, what better victim could one find.  Using his desperation to her advantage, she provides him with his answer but at an unset price (does that not sound like a witch, to have one owe her favors, but never owe others favors herself).  Later, when she comes to collect on the promise set, she asks that of him that would irk any young man in his place the most.  She, most likely, enjoyed watching him squirm and lament once her will was stated.

I think after these four reasons, my assessment that she is indeed a witch is backed.  Now, is she a wise witch?  I am going to say, “Yes!”  The fact that she is pressing the knight to marry someone as hideous as she is bad enough, but he has no proof to claim she is a witch.  By the time that he does have proof, in which to try her as a witch, he has fallen in love with her (especially with her body now being that of a young maiden).  She played her cards right and things went exactly as she probably intended.  She gained the very power over her husband that all woman wished for, but needed no magic to do so.  With that, I back my claim that she is indeed wise and with her reacquired youth, she is, indeed, a witch!