First, thanks for playing BOTH versions, we know that's quite an undertaking, lol. And we hope you enjoyed it. And also, good question!
To answer your question, yes, this was changed in version 2. The idea behind the change was that we wanted to make the evil entity scarier and more clearly represent her being under the scarlet cascabel curse because the "evil entity" is, in fact, Elizabeth, or rather her tortured soul suffering under the curse. Our original idea was to make the entity have the red mist that you saw, but inside it would be the actual "physical" form of Elizabeth's ghost, recognizable as her, but she herself would be moving in slow motion while the entity as a whole was moving quickly. We just were never able to pull it off in a way we were satisfied with and eventually just left it as the mist.