My earliest memory of the Wizard of Oz was from about 1962. My memory is that it played every year at Halloween, and it was definitely very popular with kids and adults.
I can't imagine anyone, especially adults, not getting that "inside joke." Hamilton was famous for playing that role, and that role was famous before there were movies.
You are right that the Wizard of Oz isn't the cultural phenomenom that it is today. The Wizard of Oz was really a large number of books, and they were extremely popular. The movie came out in '39, and it was instantly loved by all the adults who had read the books, and the children who were presently reading them.
Here is a quote from Hamilton:
I was in a need of money at the time, I had done about six pictures for MGM at the time and my agent called. I said, 'Yes?' and he said 'Maggie, they want you to play a part on the Wizard.' I said to myself, 'Oh Boy, The Wizard of Oz! That has been my favorite book since I was four.' And I asked him what part, and he said 'The Witch' and I said 'The Witch?!' and he said 'What else?'
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