What is the ruling on dealing with one's paternal uncle's wife who practices lying, deception, and sorcery, causes psychological harm, creates problems, and whose face shows strange marks after she has been insulted? And how can one deal with recurring nightmares in which she appears attempting to perform sorcery?

What you mentioned about your uncle's wife—her lying, ill-treatment, and hatred towards her children and siblings—indicates her bad inner nature. However, it is not permissible for a Muslim to harbor suspicions for which there is no evidence. What happened to your sister with her failure, your nightmares, and the pimples on your face does not indicate that she is a sorceress, just as rulings are not built upon dreams. Therefore, we advise you to repent from this suspicion, for Allah Almighty says: (O you who have believed, avoid much [negative] assumption. Indeed, some assumption is sin). And you should keep away from her to the extent that you avoid her harm.