Historically, Morgan le Fay was one of the biggest villains in all of literature—Arthur's half-sister who ultimately mothers Mordred and destroys the kingdom—and Twain doesn't dispute that here. She's a vain and tyrannical queen who literally executes people for touching her—"She slipped a dirk into him in as matter-of-course a way as another person would have harpooned a rat!" (16.6)—and she'd be a serious danger to Hank if she weren't scared to death of him:
She was not able to entirely cover up with them the fact that she was in a ghastly fright. (16.7)
Though the Yankee exploits her superstition to get what he needs out of her, it's very clear that she's all kinds of trouble.
She represents a curious anomaly in the book as well: Twain doesn't treat her like a joke the way he does the other Arthurian characters. She can be very charming and—scaredy-cat tendencies notwithstanding—also fairly smart. She charms the pants off of Hank, who talks about what a lovely and beautiful woman she is and how musical her voice can be:
Morgan le Fay rippled along as musically as ever. Marvelous woman. And what a glance she had: when it fell in reproof upon those servants, they shrunk and quailed as timid people do when the lightning flashes out of a cloud. I could have got the habit myself. (16.6)
Hank isn't blind to Morgan's nastier side (she knifes a guy in front of him, after all), instead perceiving her a threat (unlike, say, Merlin, who he sees as a fraud). The good guys of Arthurian literature turn out to be full of hot air here, but an evil person like Morgan? That evil is the real deal, through and through.