I thought it was great, and didn't feel like it wouldn't be part of that area.
I haven't played tabletop D&D, only the computer games, so I don't know how well it fits into overall D&D lore, but deceptive witches living in swamps or forests has been a theme in fantasy and fairy tale settings for hundreds of years. Like the story of Hansel and Gretel, for example. The quests involving the 3 witches of Crookback Bog in Witcher 3 was a highlight of that game.
This is just Larian's take on a classic theme, and I thought it was done well. If anything, it's telegraphed a little too well that she's not to be trusted on that first encounter, but I still enjoyed it. The visual transformation of the tea house was a nice touch.
