Must admit I did think it was going to be an even bigger WTF and they would actually kill her off...but hey she is magic so I'll let it slide.
What will be interesting is what they do with Mordred, because they've already shown a willingness to change the story as we know it (see Lancelot/Gwen) so as I see it there are several possible permutations:
1. The obvious one, it's a trick to get Mordred on the inside where he will effectively act a bit like Morgana a few years ago (possibly without all the panto gurning to camera)
2. Mordred is genuine, but events will conspire to turn him, much as Morgana was turned.
3. Modred is genuine, and that's it, he won't eventually kill Arthur, some other Druid is...remind me, does Merlin count as a Druid?
And Frau, they can keep taking knight's shirts off so long as they keep putting Morgana and Gwen in those low cut dresses! All's fair!