Big mistake to show the demon

I liked seeing the demon. Without actually seeing it the movie would have just been a Cat People retread.

exactly! it is better to show total eerie, crazy smoke chasing someone in the dark forest than a demon. It keeps the skepticism going, and that keeps the mysteriousness going.

Definitely.
Although it's a great film there is something slightly comical about that demon. A bit like Dee Wallace's werewolf in The Howling.

If you go with the director's vision and have the character just imagine the dreadful creature and instead gets killed by the train, as an example, you end up with just another movie where the fantastical creatures can be plausibly denied by the viewer to actually exist. It usually cheapens a movie's re-watch value in my opinion. Examples being I kill Giants or Mark of the Vampire which could have been a real classic if that twist ending didn't exist. I also recognize that I Kill Giants is a good movie but it won't be thought of as warmly as Never-ending Story years later for example. Birdman is a great movie but I'm not sure how often I'll re-watch it or if I will. If the director had fully gone with the fantastical I'm sure I'd feel like watching it more. I find it disappointing when a director takes the fantasy element out of the story by blaming it on hysterical visions or mental illness.

I would have preferred there be no demon at all whether explicitly as shown or just the smoke in the woods.

I liked seeing the demon. Just what I want to see in a '50s supernatural horror.