Complex sentence: Jill replies with the paradox that if she were a witch, she would know more than the townfolk-therefore she cannot be a witch, as she would know (as the townsfolk seem to) that she is a witch if she were.
Split into simpler sentences: Jill replies with the paradox that if she were a witch, she would know more than the townfolk. Therefore she cannot be a witch, as she would know (as the townsfolk seem to) that she is a witch if she were.