The town was apparently founded by Puritans arriving in America from England, in the 1600's. One of the towns earliest and most famous residents was Sarah Ravencroft, a witch who was executed for her crimes. It would seem there were also a number of "white witches" (what modern people would call Wiccans) living in Oakhaven at the time, who did a spell to imprison Sarah's spirit inside her spellbook and prevent it from returning to get revenge on the townsfolk. Sarah presumably had some relatives who also lived in the town and perhaps continued to live there following her execution. Perhaps to avoid persecution themselves, they insisted that Sarah was actually a healer who had been unjustly accused and punished as a witch. Even so, the legend of Sarah Ravencroft continued to be a popular story in the modern age, with Mr. McKnight going as far as to disguise himself as the Witch's Ghost to make the legend seem real. Sarah Ravencroft's modern ancestor, Ben Ravencroft, was born and raised in Oakhaven and wrote his first horror novel there. The members of the rock band, The Hex Girls, also hailed from Oakhaven. Prior to the reconstruction of the Puritan village (and the so-called sightings of Sarah Ravencroft's "ghost") to bring in tourists, Oakhaven was a quiet little town, with a slow tourist trade. Due to this, the economy was not in the best shape, though things rapidly improved after the construction of the Puritan village. This led to the villagers coming up with a scheme to have Mr. McKnight disguise himself as the Witch's Ghost so that the village would thrive.
Scooby-Doo and the Witch's Ghost
The citizens created a fake ghost witch to attract tourists. Though it first appeared that Mr. McKnight was doing this by himself, he was revealed to have gotten help from others for the scheme. Mystery Inc. solved that case, but then inadvertently helped Ben Ravencroft to raise the real ghost. (Ironically, the real ghost was far more terrifying than the fake one). In the end, the town had no witch but a real giant turkey (which curiously had not returned to normal despite Sarah Ravencroft being sealed back inside her book) and The Hex Girls to attract tourism.