The Devil's deception of Leonard Doane, his power to make Walter Brome's tauntings seem like "indubitable proofs" of moral perfidy all around, is not different from Leonard's own guilty imagination. As with the Red Cross Knight before and Goodman Brown after, Leonard Doane has obscured his own guilt by projecting it onto others: offered some ambiguous opportunity, he has leapt to the ready conclusion that Walter Brome and Alice are guilty lovers. But that conclusion is (formally) unjustified and (materially) very probably false; it tells us far more about the uneasy conscience or the "giltie sight" of Leonard than about the moral depravity of his familiar but strangely beloved sister or his estranged but all-too-familiar, all-too-cordially-hated twin brother. Leonard fixes in others, as a fact, a feeling he cannot face in himself: he murders his personified incest wish. For this terrible fact the diabolical deception of the wizard is indeed to blame: he has permitted Leonard Doane to see or to hear things that are not to be believed. But such spectral evidence can only adumbrate the psychic law of guilty projection.
And thus the historicity, as well as the unity, of "Alice Doane's Appeal." The Devil, as everyone knows, has often appeared as an Angel of Light. But he also has, according to Cotton Mather, the correlative power, as well, to assume the spectral shape of an innocent person; and this quaint Puritanic belief is literally enacted in the story's most gothic scene. The spectral epiphany, however, is no mere tour de force; whatever witchcraft may mean in "The Hollow of the Three Hills," in " Alice Doane's Appeal" it signifies the precise problems of historic Salem. The terrifying display of "false specters of good men " points to the moral identity of the older, fictional with the newer, "truer" story. Leonard Doane himself and Cotton Mather (as an official representative of Old Salem) are alike taken in by the Devil's powers of spectral deception; and in both cases the charges of diabolical evil probably reveals more about the accuser than the accused.
Ultimately, therefore, the function of the narrator's second effort is not simply to move to tears some clearly inadequate audience; it is, rather, to suggest the extent to which his original story was itself already adequate--in spite of its rather wild indulgences--to the essential history of Salem Witchcraft. Without methodological fanfare, the older story had simply enacted the truth of specter evidence as guilty projection: the moral facts were there before the technical language was inserted. Beyond this, the original story contains at least one absolutely telling, allusive clue to its own essential historicity, locating itself in ideological time and validating the narrator's claim to dangerous relevance. Significantly, the historical trace appears in the very first paragraph of the original story; and though the unwary may miss it, its interpretative significance looms as large as the open invocation of the recent historian's "honorable monument."
Source: Colacurcio, Michael J. The Province of Piety: Moral History
in Hawthorne's Early Tales. Cambridge: Harvard University Press, 1984.