My biggest theory after watching episode 6: the Big Evil lady isn't actually Eun Oh's mom. Oh, there's someone in Mom's body, but it's not his mother. I think that besides being some soul-sucking succubus, Big Evil is also a body thief, and needs new bodies to inhabit on a regular basis. If we consider, the actress playing the woman who gave Joo Wal the ring is not the same woman who plays Eun Oh's mom, as we are meant to believe. Her voice is quite different, and if you look at the sliver of her face we're shown, they aren't the same person.
So, the Big Evil has only been in Eun Oh's mom's body for three years—when Mom first came to Miryang. Something happened then, and now she's taken over this body. The talisman placed on Arang is used to keep the spirits with the bodies until she can complete her spell, although the victim has already been killed. I think she discards the old bodies and dumps them in the pit when she's used them up and imprisons their spirits. And she's been doing this for a looong time. Like 400 years long, since there are so many bodies down in the pit. (All the ones lined up, plus a bunch more in the carts below.)
I think one of two things happened three years ago. The first theory is that Arang was the intended sacrifice. She was led to the altar (we saw in flashback that at least one young woman was led by child Joo Wal, so he could have used a pretense to get Arang there), but somehow Eun Oh's mom intervened and was used in Arang's place.
The other option is that Mom was the intended sacrifice. It would be sooo interesting if she would still be considered a pure soul even when her heart was so full of revenge. But it's also possible that she had the same abilities Eun Oh does, and that made her a desirable candidate. Arang was somehow secretly present at the shack—maybe she followed Mom, or maybe Joo Wal—but she saw what happened and had to be "taken care of."
Either way, Arang fled/fought back, grabbing the hairpin as a weapon (either before or just after the transformation), but she was killed in the process. And because she was somewhat involved in the spell, she was changed—her ghost had amnesia, and her body didn't decay. Big Evil still got what she wanted—a soul and a shiny new body—and Arang still died, but not at the shack, or they would have just thrown her into the pit. Big Evil, Joo Wal, and/or Lord Choi were involved in her death, so when her body resurfaced, it created problems, which is why the Chois wanted so desperately to cover it up.
Also, Lord Choi keeps gloating over Joo Wal and his huge mistake of losing the victim, but in a way that indicates he never had that same thing happen. It's more like he has seen it, so he knows what's in store for Joo Wal. Probably his sunbae committed the same/a similar error and had to pay the price. I think Lord Choi has made other mistakes, though none so grave, so he's been punished before, but not to that degree. And Big Evil surprises him by taking her wrath out on him instead of Joo Wal after the loss of Arang this time.
If Arang had been lost as the victim without any replacement, Joo Wal would have already had to deal with all these issues 3 years ago. But this is the first time making a major mistake, and he's terrified of the consequences. Even if he doesn't understand the full extent of the punishment he could suffer. Arang dying 3 years ago would have been an acceptable solution to the mistake of her not being the sacrifice or finding out about their occult ritual. So Joo Wal wouldn't have faced Big Evil's wrath to the same extent, I think, since the problem was "fixed."
I don't think Joo Wal bacame engaged to Arang in order to kill her. I think she was part of his ambition—marrying the magistrate's daughter would have strengthened his social and political status and would have made him seem more legitimate. Plus, she's totally gorgeous, so there's that. I think she became collateral damage—either because she made the ring glow, or because she witnessed something she shouldn't.
I believe that Eun Oh's ability is also a major key to finding out the answers to these mysteries. Either he was born with the ability to see ghosts, or it happened when his mom was taken over, but that story is significant. I'm inclined to believe he was born with it, because I think his mom was the intended sacrifice from 3 years ago. He's definitely a crucial player in solving the mysteries.
Also, I wonder if the Jade Emperor is unable to see/influence Big Evil directly. We know she has power over death she shouldn't—the souls that have been going missing weren't on the Jade Emperor's master death list, and I'm sure they're the souls of the girls taken over the centuries. If he can't see/touch her, but only sees the ripples she causes, it makes sense to me that he would need an agent like Arang to stop her. And now he's made her extra awesome, because she can't be killed. Plus, she has an ability to influence and galvanize Eun Oh into action—which is important because of his abilities.
I think this world and its mythology are carefully built, and everything is part of the bigger puzzle. (I really hope that's the case, and that this isn't going to be another Big—I maintained faith in that one up until about episode 15, when I realized there really wouldn't be answers to most of the questions/mysteries presented.) But this drama feels like it really has things figured out. Plus it has a good pedigree, so I'm full of hope. I just love this ride. To death. Or not-death. I'm good with either.