I'd forgotten the weird situation with emily ketch until I was playing BS2 this afternoon. It seems creepy either way you look at it.
She's friends with the boy rio who used to play hide & seek with her. When you get to zombie island and talk to him about emily, his dialogue seems to imply fairly strongly (lots of past tense, george's strange post-conversation statement) that she was dead, trapped in an old trunk for days beause it couldn't be opened from inside. Thats a bit creepy since if she's a ghost she had enough of a physical form to take a shell and give george the cross.
Her aunts seem surprised that you're talking about her but sort of imply that she's alive (at least I don't distinctly remember use of past tense like with rio) and emily herself says she's not allowed out of the house, that sounds to me like they might have lied to rio and said she was dead and were basically keeping her captive to ensure they can't interact. Thats pretty screwed up...
Her aunts seem shocked when you say you saw a little girl playing with rio on the beach but I'm not sure if this is "the ghost is back" shock or "the captive is on the loose" shock.
Am I so negative & cynical that I can't see an explanation other than these? Anyone else got a theory?

Interesting theory and indeed creepy.
I think the aunts' reaction was less "the ghost!" and more "she's playing with that Rio kid!", since everyone on the island seems to hate him for some reason.
Never did figure out what was so bad about him.

She's a ghost. This has been long disputed over on the Rev forums.

hehe, thanks for mentioning that.. it was far too subtle for me to pick up.

Yeah, I didn't pick up on this either! Very interesting! I was too concerned with trying to sort the chap with the theodolite out!

This was completely lost on me. Wow. I wish I was paying a bit more attention now...

It really is just one of those revelations that comes to you in an odd eureka moment. I guess this is one way that Broken Sword is a story that stays with you, it's presented in a strange, philosophical way and you ponder it for a long time afterwards until it finally comes to you.

Apologies for the necro of sorts, but bahh I can't believe I didn't pick this up.

I thought she was a Zombie and had to stay in the air-tight chest to preserve her corpse!

I always thought she was just imprisoned in her own house and she didn't want to be seen around by those ladies.

Another thing supporting the "ghost" theory is when you speak to her from behind, instead of Having a "turning around" animation, she just sort of fades into facing the opposite direction.

George's comment implies quite obviously that she's a ghost. When you play that part of the game second time it becomes even more obvious, because dialogue with Rio, Emily and her aunts gives very subtle hints about it. What confuses most is the reaction of the aunts, when George tells that he has seen Rio with little girl. But you have to remember that the aunts are little bit crazy and who knows maybe they know that she haunts the house. Emily's own dialogue seems to indicate that she has interacted with one of her aunts, but then again she might be remembering stuff which happened before her death.