What I don't understand

First of all, people are fickle and stupid.

Most of what they thought about her was made up based on hearsay and began as a lie. It was fun to talk about her and it was fun to impress one another with what they "knew" about her. Everyone, men and women, only thought of her as an object of sex and the men took advantage of her at every opportunity. When she applied for employment, no one would hire her because of her reputation (which, of course, was fabrication).

Since no one would help her, she finally went along with their perception and became a prostitute to the Germans. Only the Germans would provide for her and protect her while she was in this line of "work". Once the Allies arrived and the Germans were safely away, the townspeople attacked her as a collaborator -- completely blind to the fact that they turned her to this.

When she returned a year later, she was with her husband. This made her "safe" so the women would not fear for their own husbands. At the market she knew that her future was going to be bound with these people and they knew it too.

Everyone had to put the past behind them.

A bigger question: why did Malena (and her husband) come back to town in the first place? If I were Malena, you couldn't drag me back to that place with a crowbar. Were financial circumstances so bad that the couple had to return? If so, were they able to get the house back or get jobs? Was it the husband's idea to come back? Malena's? Was pride involved? A longing for familiarity? What the heck would possess them to come back?

Spoilers.

I viewed the situation to be one of remorse; the people in that town acted terribly. Especially due to the final assault. After their heads cleared they actually felt bad about the way they treated her. Time heals all wounds, hindsight is 20/20. Perhaps a little bit of logic crept into their heads and they realized they had treated her unfairly - even criminally.
I also think Malina was an emotional island - she sheltered herself in solitude after her husband's "death." The end scene was one of the only scenes I can recall that showed her smile and converse with another woman. Malina broke out of her shell (a bit), and the response was immediate.

I agree that the reaction was based on the remorse for the envy demonstrated during the years of war. After the war there are now hopes of a new life and new opportunities. It' a rebuild of demolished buildings as well as crushed hearts and minds. I've not been through one, but I heard the stories from the elders.

To the question of why they came back, I believe that is an Italian thing, something about roots and generations, although only from the husband side since she wasn't from the town. Also being Sicily, there a lot to be said about pride.

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They're being hypocrites. Just like throughout the movie. Only she's not as young and pretty as she was years before that so she's not a 'threat' anymore so they 'accept' her instead of condemn her.

They were nice because of several reasons:
- I think they felt ashamed about how they treated her
- Her husband is back and that is great that he is still alive,
so she is respected again as well
- She is now not a single woman anymore
- however they felt about her before, she was part of the community,
part of the history of the village, whether an outcast or not.
So they felt connected to her.

There was this moment in the movie before that she has wrinkles around the eyes and could be less fat. So woman felt more safe about her and also everyone in the market was interested in potential client.