Was it the character's inner devil that came up in Devil?

It is a simple as the Old Woman is the devil.

As far as who killed who:

In a last, desperate plea for forgiveness, Tony, using a radio, confesses to a hit and run five years earlier: while drunkenly reaching for beer in his car, he smashed into another car and killed a woman (unknown to Tony that the woman was Jesse Bowden, Detective Bowden's wife) and her child.

Tony killed the Detective's wife and child.