If the game tells you that you can now challenge Long Wyoung, while you can't actually do so in the current build, then I would call that a (small) flaw in the current build, since that line could have just been commented out until it gets updated.
If you pass a check (INT iirc, but I'm not clicking through the whole game to make sure :p) with the correct degree of success, when she tries to convince MC to follow her to the cave, then MC lists several similarities between Ro Huy/Hyi and the "Mistress/Little Demon Queen" (e.g. androgynous, wears mask to hide deformed face, etc.). So that comparison strongly suggests to me that MC recognizes her suspects her identity.